Bonds FAQ's

Government bonds are debt securities issued by the Government of India or state governments to finance fiscal deficits and infrastructure projects. They offer fixed interest payments and are considered low-risk investments.

Corporate bonds are debt instruments issued by companies to raise capital. They typically offer higher interest rates than government bonds but carry higher credit risk depending on the issuer's financial health.

Tax-free bonds are issued by government entities where the interest income is exempt from income tax under Section 10 of the Income Tax Act. These typically have long tenures (10-20 years) and slightly lower yields compared to taxable bonds.

SGBs are government securities denominated in grams of gold. They combine the safety of sovereign bonds with gold price appreciation benefits, offering 2.5% annual interest plus potential capital gains.

You can purchase government bonds through:
1. Primary auctions via RBI's E-Kuber system
2. Stock exchanges (NSE/BSE)
3. Mutual funds or ETFs that invest in bonds
4. Retail Direct platform by RBI for individual investors

For government bonds, the minimum is typically ₹10,000 face value. Corporate bonds usually have higher minimums (₹1-10 lakhs). Retail investors often access bonds through debt mutual funds with lower entry points (₹100-₹5000).

Interest income is taxed as 'Income from Other Sources' at your applicable slab rate. Capital gains are taxed at 10% (without indexation) or 20% (with indexation) for long-term holdings (>3 years). Short-term gains are added to your income.

YTM represents the total expected return if you hold the bond until maturity, accounting for current price, coupon payments, face value, and time remaining. It's the most comprehensive measure of a bond's potential return.

Key risks include:
- Interest rate risk (prices fall when rates rise)
- Credit/default risk (issuer may default)
- Inflation risk (real returns may be negative)
- Liquidity risk (some bonds trade infrequently)

Generally yes - bonds have higher claim priority during liquidation and provide predictable returns. However, corporate bonds can carry significant credit risk. Government bonds (especially central govt) are considered safest.