Sovereign Gold Bond

What are Bonds & How are they Useful?

Before making investments, you must be aware of the various market instruments. If you are about to start your investment journey, then you must have come across the term: bonds. Wondering what are bonds? Well, here is a comprehensiveguide about bonds.

Types of Bonds in India

To know more about what are bonds and its types, here’s a look at the different types of bonds in the country.

Government securities:

These bonds are issued by the state or central government. It is among the safest investment instruments as the risk of credit default is eliminated.

Sovereign Gold Bond:

These are again government securities issued by the RBI, on behalf of the government. These are an alternative for holding physical gold, and are denominated in grams of gold.

Capital gains bond:

These are also issued by the government. Here, you can transfer your capital gains into the specific bonds. These bonds provide an exemption from the capital gains tax, provided you invest in them within six months from the date of receipt of the capital gain.

Corporate bonds:

These are issued by companies and provide a comparatively higher rate of interest. But they have inherent credit risks.

Convertible bonds:

These bonds can be converted into stocks, as per the predetermined terms and conditions.

Fixed interest bonds:

These have a predetermined interest rate across the bond’s tenure. The advantage of these bonds is that they provide a fixed interest, irrespective of the market conditions.

Floating interest bonds:

These bonds have flexible rates of interest, which in turn, is contingent upon a wide range of market variables.

Inflation-linked bonds :

These bonds are designed to cushion the investor from the effect of inflation on the coupon rate and face value. These, however, have a lower coupon rate as compared to fixed interest rate bonds.

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