A bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon) and/or to repay the principal at a later date, termed the maturity date. Interest is usually payable at fixed intervals (semi-annual, annual, and sometimes monthly). Very often the bond is negotiable, i.e. the ownership of the instrument can be transferred in the secondary market.

Thus a bond is a form of loan or IOU (sounded "I owe you"): the holder of the bond is the lender (creditor), the issuer of the bond is the borrower (debtor), and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure.

Government Bonds

These kinds of bonds are issued and backed by the Government of India. In other words, the Indian government offers investors bonds at a fixed rate. The government also employs an investment banker, whose main responsibility is to serve as a middleman. However, it is difficult for retail individuals to invest directly in these bonds as the minimum investment amount is very high.

Corporate Bonds

These bonds are offered by corporate houses and are open to everyone. However, these bonds are not as safe as government bonds as the issuing companies are subject to market volatility, industry ups and downs, etc.

Please contact us for more details about the current interest rate on Capital Gain Bonds.