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Earn higher returns by lending to quality companies
Corporate bonds are debt securities issued by companies to raise capital for business operations, expansion, or refinancing. When you buy a corporate bond, you're essentially lending money to the company in exchange for regular interest payments and return of principal at maturity.
Non-Convertible Debentures (NCDs) are a common form of corporate bonds in India. Unlike convertible debentures, NCDs cannot be converted into equity shares and must be repaid at maturity, making them a pure debt instrument.
Credit rating agencies like CRISIL, ICRA, CARE, and India Ratings assess the creditworthiness of bond issuers. Higher-rated bonds (AAA, AA) are safer but offer lower yields, while lower-rated bonds offer higher yields with more risk.
Lowest credit risk. Strong capacity to meet obligations. Examples: HDFC, REC, PFC
Very low credit risk. Adequate capacity to meet obligations.
Moderate credit risk. May be affected by adverse conditions.
High credit risk. Speculative or default grade. High default probability.
For beginners, stick to AA and above rated bonds. Lower ratings carry significant default risk.
Corporate bonds typically offer 1-3% higher yields than G-Secs, compensating for credit risk.
Independent rating agencies assess creditworthiness, helping you make informed decisions.
Available in various tenures from 1 year to 10+ years to match your investment horizon.
Monthly, quarterly, or semi-annual interest payments provide steady cash flow.
Secured NCDs are backed by company assets, providing additional protection in case of default.
Add fixed income exposure to your portfolio with returns uncorrelated to equity markets.
Dedicated platforms curate and list corporate bonds with ratings, yields, and easy purchase.
Platform fees: 0.5-1% typically
Buy listed NCDs through your demat account on NSE/BSE like stocks.
Liquidity can be limited for some bonds
Apply during primary issues when companies raise fresh capital.
Issues are periodic, not always available
| Aspect | Details |
|---|---|
Tax Rate | As per income tax slab |
TDS | 10% if interest > ₹5,000/year |
Reporting | Report under 'Income from Other Sources' |
| Aspect | Details |
|---|---|
LTCG (>12 months) | 12.5% |
STCG (<12 months) | As per slab rate |
Indexation | Not available (from FY 2024-25) |
For unlisted bonds, LTCG applies after 24 months (not 12). LTCG rate is 12.5% without indexation. Always prefer listed bonds for better tax treatment and liquidity.
The issuing company may fail to pay interest or principal. Lower-rated bonds have higher default probability.
Bond prices fall when interest rates rise. Longer duration bonds are more sensitive to rate changes.
Some corporate bonds have thin secondary markets, making it hard to sell before maturity at fair prices.
Common questions about Corporate Bonds
Tools and guides to help you make better investment decisions