BBB Rated Bonds

BBB-rated bonds are fixed income securities representing a moderate degree of safety in terms of interest and principal repayment. These bonds are considered low-risk bonds, as their moderate credit rating indicates lower default risk in debt repayment. Due to this lower default risk, issuers usually offer lower yields than those of bonds with higher credit risk.

BBB bonds fall under the lowest end category of investment grade bonds, i.e., bonds having credit ratings of AAA to BBB. They represent the final step before junk bonds or high-yield bonds, i,e, bonds carrying a credit rating of BB to D.

Investors can invest in BBB bonds through the Paisabazaar app or website. To start investing in bonds, follow the steps below:-

The interest income or coupon payments received periodically from the BBB bonds are fully taxable as per the taxpayer’s income tax slab. 

Further, if a bond is sold before the maturity date, any capital gains arising from the sale are subject to capital gains tax as per the Income Tax Act. The tax on bonds depends on the holding period. Short Term Capital Gains (STCG) are taxed when the gains arise within 12 months of the bond purchase. It is taxed at the slab rate of the individual under the head ‘Income From Other Sources’. Long term capital gains (LTCG) are taxed when gains are booked after 12 months of bond purchase. It is taxed at 12.5% for listed bonds, without indexation.