What is a bond?
A bond is a loan you give to a government or company. In return, the issuer pays you regular interest (the coupon) and returns your principal (the face value) on the maturity date. Bonds bring stability and predictable income to a portfolio.
Key bond terms
| Term | Meaning |
|---|---|
| Face value | Amount repaid at maturity (e.g. ₹1,000 or ₹10,000). |
| Coupon | Annual interest rate on face value (e.g. 7.5%). |
| Maturity | Date the principal is returned. |
| Yield to Maturity (YTM) | Total annual return if you hold till maturity at today's price. |
| Duration | Sensitivity of the bond price to interest-rate changes. |
| Credit rating | AAA (highest safety) → D (default), by CRISIL, ICRA, CARE, India Ratings etc. |
Types of bonds in India
- Government Securities (G-Secs) — issued by the central government; sovereign safety; maturities up to 40 years.
- Treasury Bills (T-Bills) — short-term government paper of 91, 182 and 364 days, issued at a discount.
- State Development Loans (SDLs) — issued by state governments; usually slightly higher yield than G-Secs.
- Corporate bonds / NCDs — issued by companies; higher yield, credit risk varies.
- PSU & tax-free bonds — issued by public sector entities (NHAI, REC, PFC etc.).
- RBI Floating Rate Savings Bonds — 7-year bonds whose rate resets every six months.
- Sovereign Gold Bonds (SGBs) — gold-linked government bonds; no new tranches have been issued since early 2024, but existing SGBs trade on exchanges.
- 54EC bonds — used to save capital gains tax on property sale (5-year lock-in).
How to buy bonds
- RBI Retail Direct — open a free gilt account with RBI to buy G-Secs, T-Bills and SDLs directly.
- Stock exchanges — buy listed bonds through your broker via NSE/BSE.
- SEBI-registered Online Bond Platform Providers (OBPPs) — corporate bonds from smaller ticket sizes.
- Debt mutual funds / bond ETFs — easiest diversified route (e.g. Bharat Bond ETF, gilt funds).
Risks & taxation
- Interest-rate risk — prices fall when rates rise.
- Credit risk — issuer may delay or default; check ratings.
- Liquidity risk — some bonds trade rarely.
- Reinvestment risk — coupons may be reinvested at lower rates.
Tax: Interest is added to your income and taxed at slab rate. Capital gains on listed bonds depend on holding period; rules were revised in 2024 — check with a tax adviser.
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Educational content only — not investment advice. Rules and tax rates mentioned are as understood at the time of writing and may change; verify with official sources (SEBI, RBI, Income Tax Dept.) or a qualified adviser.