There are different types of bonds in India, and investors should research them before investing.
Some of these include Public Sector Undertaking bonds, Corporate Bonds, Emerging Market
Bonds, and Tax-Savings bonds.
Types of Bonds in India
Bonds are financial instruments that pay a fixed rate of interest to investors. They also have a
face value and a maturity date. When these bonds mature, the issuer of the bond repays the
holder of the bond all the money they borrowed from them.
The interest on bonds is taxable under the Income Tax Act. However, investors who fall in high
tax brackets may be able to deduct the interest they receive.
Investing in bonds can be risky. But they can provide a good return over the long term.
Government bonds
These are the most common type of bonds in India. They are issued by the central and state
governments to raise funds for projects that benefit the people of the country.
Municipal bonds
These government bonds are backed by a revenue source, such as taxes or lease fees. They
typically have a 10-year or longer maturity and have low default risk.
Capital Indexed Bonds
These bonds have a par value that is indexed to inflation. As a result, they have greater interest rates than conventional bonds.
Inflation-indexed bonds (IIBs) are a variant of this bond category. IIBs are based on the
market-average price of inflation, and they are a great way to protect your money against rising
prices.