Corporate Bonds

An investment avenue in which an investor loans money to a corporate entity that borrows funds for a defined period of time at a fixed interest rate. Bond market has not attracted retail investors to it. But in recent times, low rate of bank interest have attracted retail investors towards bonds issued by corporate.

Advantage:

The rate of interest is high.

Disadvantage:

No security, interest earned is taxable. So before investing in bonds do check the credibility of the company offering the bond and past record of the company.

8% RBI Bonds

Bonds as issued by the Reserve Bank Of India (RBI). The rate of interest offered is 8 per cent, payable half yearly with cumulative and non-cumulative option available. Tenure is six years.

Advantage:

Safety, guaranteed return.

Disadvantage:

Interest is taxable.

Government securities :

Retail investors have not tapped this investment avenue as much as others. It is good for investors looking for reasonable returns with no risk of default as the securities the Government offers these securities. These securities can be held in a demat format. The market is limited so liquidity can be a problem. Investors need to have a thorough knowledge of this investment format to invest in them. Well, then if you are the one who prefer the comforts of safety to the greed of high returns all the above debt instruments are yours to invest in.

Capital Gain Bonds

As per provisions of Income Tax Act, 1961, any long term capital gains arising from transfer of any capital asset would be exempt from tax under section 54EC of the Act if:

• The entire capital gain realized is invested within 6 months of the date of transfer in eligible bonds.
• The eligible bonds under Section 54 EC are RECL (Rural Electrification Corporation Ltd) and NHAI (National Highways Authority of India).
• The maximum investment limit amount is Rs. 50 Lakhs.
• The block period for the investment of these two companies is 3 years.
• 100% risk free investment.