DEBT MARKET ~ Low Risk Steady Rewards
Corporate Fixed Deposits
- Issued By Non-banking companies (Manufacturing firms, Finance companies, Housing Finance Firms, etc.).
- Higher Interest Rates compared to bank FDs.
- Safety depends on the company’s credit rating. Unlike bank FDs, corporate FDs are not backed by deposit insurance.
54EC Bonds
- Special category of capital gains tax-saving bonds in India, designed to help investors reduce tax liability after selling long-term capital assets like property, land, or buildings.
- Issued by Government-backed institutions such as REC (Rural Electrification Corporation) and NHAI (National Highways Authority of India).
- Very low risk, since they are backed by government entities.
- Exemption under Section 54EC of the Income Tax Act if invested within 6 months of asset sale.
RBI Bond
- Issued by the Reserve Bank of India, designed to provide safe and steady returns for investors.
- Particularly attractive to conservative investors who prioritize security over high risk.
- Premature redemption allowed only for senior citizens (with conditions) cannot be traded
Sovereign Gold Bonds
- Government-backed, eliminates risks of holding physical gold.
- Tradable on stock exchanges.
- Capital gains on redemption are tax-free
- Interest is taxable.
Non-Convertible Debentures NCDs
- Issued by Corporates and NBFCs (Non-Banking Financial Companies).
- Listed NCDs can be traded on stock exchanges, offering liquidity.
- Depends on the issuer’s credit rating; higher-rated NCDs are safer.