These instruments are ideal for Investors looking for investment products that manage liquidity and risks while offering substantial returns. Debentures are long-term financial instruments issued by a company for specified tenure with a promise to pay fixed interest on regular basis. Debentures are of two types, namely convertible debentures and non- convertible debentures (NCDs). Non-convertible debentures (NCDs) are those which cannot be converted into Equity shares. NCD interest rates depend on the company issuing it.
NCDs have priority over Equity shares at interest payment as well as repayment of Debt (either on end of Term) or on liquidity of company assets in case of banktrupcy. NCD investment can be held by individuals, banking companies, primary dealers other corporate bodies registered or incorporated in India and unincorporated bodies, Non- Resident Indians (NRIs) and Foreign Institutional Investors (FIIs). Investor for security and fixed interest can invest in secured NCDs to get multiple benefits.
54EC Capital Gain Bonds
The Under Section 54EC of Income Tax, 1961 an investor need not pay any tax on long-term capital gain arising on sale of any asset, if the amount of capital gain (or full value of consideration in certain cases) is invested in Government authorised specified bonds such as Rural Electrification Corporation Limited (REC), National Housing Bank (NHB), SIDBI, NABARD and National Highways Authority of India (NHAI). This list can be changed by the Government on a timely basis. Some key features of Section 54EC bonds are: - Highest credit rating of AAA by CRISIL, CARE and FITCH. - Interest is taxable although no TDS is deducted. - Lock-in of around 3-5 years (period might change and is declared in the preceeding union budget) and non- transferable. - Minimum amount of investment Rs 10,000 and multiples. - Maximum investment by an assessee is one financial year is 50,00,000.