Bonds in India

Senior secured bonds are a type of secured bonds that are senior in capital structure. In addition to being backed by collateral, these bonds receive higher priority in receiving repayments over sub-ordinated or junior secured bondholders, if and when the issuer defaults.

The following SEBI-recognised credit rating agencies rate bonds based on its issuer's financial health: Acer Credit Rating Pvt. Ltd. Acuite Ratings & Research Ltd. Brickwork Ratings India Pvt. Ltd. CARE Ratings Ltd. CRISIL Ratings Ltd. ICRA Ltd. India Ratings and Research Pvt. Ltd. (formerly Fitch Ratings India Pvt. Ltd.) Infomerics Valuation and Rating Pvt. Ltd.

Corporate bonds are debt instruments issued by public sector and private sector companies to raise money for financing their operations, expansion, debt consolidations, etc. When you invest in a corporate bond online, you basically lend money to the bond issuing company, which in return pays fixed periodic interest payments with a promise to repay the principal amount on its maturity date.

Government bonds are issued by the central government to raise funds for financing their spending and other obligations. These bonds are usually issued for tenures ranging from 5 to 40 years and make interest payments on a half-yearly basis. Being backed by sovereign guarantee, government bonds are considered among the safest investment options in India.

When a bond issuer defaults on its repayments, the chances of recovering the obligated sum would depend on whether the bond is secured and its status in the capital structure. Senior secured bondholders receive the highest priority in receiving repayments, giving them the highest level of protection. Sub-ordinated or junior secured bondholders receive the second highest priority followed by unsecured bondholders.

Stock market fluctuations do not directly affect the bond returns. Bonds usually pay fixed interest payout until their maturity dates. However, factors like prevailing interest rate cycles, systemic liquidity, macro-economic conditions, etc. may impact both bond markets and equity markets, often with opposite impacts.

The interest earned on bonds in India is fully taxable as per the individual's income tax slab, barring a few exceptions such as in case of tax-free bonds issued by REC, PFC, etc. if you sell bonds on maturity, capital gains tax applies based on the holding period and whether the bond is listed or unlisted.

The valuation of a bond depends on various parameters such as coupon rate, prevailing market interest rates, residual tenure, issuer’s credit rating, etc.

Individuals should invest in bonds online with Paisabazaar when they want lower risk and stable income, especially during the periods of market volatility or high interest rates. Check out the complete guide on How to Invest in Bonds Online

Bonds can be bought through primary and secondary markets, which includes stock exchanges, online bond platforms like Paisabazaar, banks and financial institutions.