What are corporate bonds?

Large institutions have huge capital requirements and so they take “Debt” periodically with a promise to pay back.  And the guarantee assuring that promise is known as a ‘bond’.  Unlike an equity stock, Debt involves borrowing money with the obligation to pay it back in full on Maturity, along with interest over time. That’s why debt instruments are also called Fixed income instruments.

Most diversified investment portfolios contain some allocation each to equity stocks and bonds, where bonds are often considered the more conservative choice of the two.

There are several kinds of bonds available Like Tax-free bonds, RBI Bonds and Capital gain bonds.

One of the hugely-popular investment options, especially among high net worth investors, is tax-free bond.  The income by way of interest on these Bonds is fully exempt from Income Tax and shall not form part of Total Income

These bonds are generally issued by Government-Backed entities and thus have very low default risk. And even though they have a tenure of 10-20 years, they are listed on stock exchanges to offer an exit route.

Another popular bond to avail Tax exemption is called 54 EC bond the best ways to save long-term capital gains tax from investments or sale of a property.  while you save tax by investing in these bonds, you also earn interest income on the same. So, in a way, you get paid to save tax.

Give your portfolio stability and steady growth with the help of bonds.

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