Fixed income investments pay you a stated Rate of Interest for a fixed period. Bonds and NCDs are debt securities held in your demat account; a Corporate Fixed Deposit is a deposit placed directly with a company or NBFC. In all three, the return is agreed at the outset.
A Fixed Income investment is one where you lend money to an issuer — a government, a company or an NBFC — in return for interest at a stated rate and repayment of your capital on a fixed date. Unlike equity investments, the return is agreed at the outset rather than depending on market performance, and the main risk is that the issuer is unable to pay.
DhanTarang distributes three fixed income products as a Referral to the Investors. The cards below are the short version; each is explained in full further down the page.
A Bond is a debt instrument. When you buy one, you are lending money to the issuer, which agrees to pay you interest at a stated rate, called the coupon, and to repay the face value on a fixed maturity date. A Non-Convertible Debenture (NCD) is a bond issued by a company or NBFC that cannot be converted into equity shares at any point.
The difference between the two is narrower than most people expect. Every NCD is a bond. "Bond" is the broader term covering government securities, PSU issues and corporate debt, while "NCD" refers specifically to corporate debentures that stay debt for their whole life. In everyday use the two words are often used interchangeably for Corporate debt.
Issued by: The Government of India
Sovereign backing, so credit risk is effectively nil. Prices still move with interest rates.
Issued by: State governments
Backed by state governments. Generally, yield slightly more than G-Secs.
Issued by: Public sector undertakings
Issued by government-owned companies. Credit quality is usually high but is not sovereign.
Issued by: Companies and NBFCs
Yields are higher because credit risk is higher. The rating and the issuer are what you are actually buying.
Issued by: Companies and NBFCs
Backed by a charge on the issuer's assets, so secured holders rank ahead of unsecured ones if the issuer defaults.
Issued by: Companies and NBFCs
No asset backing. Higher yield, and holders rank behind secured creditors in a default.
Issued by: Banks and financial institutions
No maturity date, and terms can allow the issuer to skip coupons or write the bond down. Materially riskier than they look.
Issued by: Specified government-backed entities
Used to claim exemption on long-term capital gains from property, subject to a 5-year lock-in and an annual limit.
A Corporate Fixed Deposit is a term deposit placed with a company or a Non-Banking Financial Company rather than with a bank. You deposit a lump sum for a fixed period at a rate agreed at the outset, and the company pays interest and returns the principal at maturity. Unlike a bank fixed deposit, a corporate fixed deposit is not covered by DICGC deposit insurance.
That difference is the reason corporate deposits generally offer a higher rate than banks. You are lending to a company rather than to a bank, and the extra interest is compensation for taking on that company's credit risk.
Deposits accepted by NBFCs are regulated by the Reserve Bank of India, and deposits accepted by other companies fall under the Companies Act. Rated deposit programmes carry a credit rating, and that rating is the most useful indicator of how safe the deposit is.
Invest at issue or buy in the market. Subscribe to a new public issue when it opens, or buy an already listed bond in the secondary market at the prevailing price.
The Security is credited to your demat account. Listed bonds and NCDs are held in dematerialised form, in your own name.
Interest is paid at the stated frequency. Monthly, Quarterly, Annually, or accumulated to maturity, depending on the option chosen at investment.
Face value is repaid at maturity. On the maturity date the issuer repays the face value. Perpetual bonds are the exception — they have no maturity date.
Choose the issuer and the tenure. Compare the credit rating first and the rate second. Tenures typically run from twelve months to five years.
Choose cumulative or payout. Decide whether you want the interest accumulated to maturity or paid out at a chosen interval.
Complete the application and KYC. The deposit is placed in your name, with a nominee recorded. Keep the nomination current — it saves the family considerable difficulty later.
The deposit matures or is renewed. At maturity the principal is repaid, or the deposit is renewed at the rate prevailing on the renewal date, which may be higher or lower.
Bonds, NCDs and Corporate deposits all offer a choice between receiving interest as you go or letting it accumulate. The right choice depends on whether you need the income now or later.
Interest from all three is added to your income and taxed at your applicable slab rate. That applies whether the interest is paid out periodically or accumulated. In a cumulative corporate deposit, interest is taxable as it accrues each year, not only when you receive it at maturity.
If you sell a listed bond or NCD on the exchange before maturity, any gain is treated as a capital gain, with the treatment depending on how long you held it. Holding to maturity produces interest income rather than a capital gain. A corporate fixed deposit cannot be sold, so this does not arise.
Companies deduct tax at source on deposit interest above the prescribed threshold and issue a TDS certificate. If your total income is below the taxable limit, you can submit Form 15G, or Form 15H if you are a senior citizen, to have the deduction stopped.
Capital Gain Bonds under Section 54EC are treated differently — they are used to claim exemption on long-term capital gains from the sale of property, subject to a lock-in and an annual investment limit, and the interest they pay remains taxable.
Tax treatment depends on your personal circumstances and the rules in force at the time. Please consult a qualified tax professional before making a decision based on tax treatment.
The main risk everywhere on this page. If the issuer cannot pay, you may lose interest, capital, or both. A credit rating is an opinion at a point in time, and ratings can be downgraded during the life of the investment.
Corporate and NBFC fixed deposits are not covered by DICGC deposit insurance. If the company cannot repay, there is no insurance scheme standing behind your money. This is the most important difference from a bank fixed deposit.
Many Corporate Bonds and NCDs are listed but trade thinly, so selling before maturity may be difficult or only possible below a fair price. Corporate deposits cannot be sold at all, and premature withdrawal is restricted and penalised.
Bond prices move inversely to interest rates. If rates rise after you invest, the market price of your bond falls. This only matters if you sell before maturity. A deposit rate is fixed and unaffected.
Each of these is exposure to a single issuer. Spreading across issuers, and not placing a large share of your savings with any one of them, matters more here than with a diversified fund.
These have no maturity date, and their terms can allow the issuer to skip coupon payments or write down the principal in certain circumstances. Read the terms in full before considering one.
DhanTarang offers Bonds, NCDs and Corporate Fixed Deposits as Referral. In every case the obligation to repay sits with the issuer or the depositing company, not with DhanTarang.
We go through the Credit Rating, whether an NCD is secured or unsecured, whether a deposit is with an NBFC or another company, and the tenure — so the extra return on offer is understood in the context of the risk attached to it.
Monthly income or accumulated interest, and a maturity date that lines up with when you actually need the money back.
We handle the paperwork, remind you before maturity so a renewal decision is not made by default, and your holdings sit alongside your Mutual Funds, PMS, AIF and MLDs in one portfolio view.
A Non-Convertible Debenture is a debt instrument issued by a company or NBFC that pays interest at a stated rate and repays the face value at maturity, and which cannot be converted into equity shares at any stage. NCDs are usually listed on an exchange and held in a demat account in your own name.
An NCD is a type of bond. "Bond" is the broader term covering government securities, state development loans, PSU issues and corporate debt. "NCD" refers specifically to a debenture issued by a company or NBFC that remains debt for its entire life and is never converted into shares. In practice the two words are often used interchangeably for corporate debt.
A corporate fixed deposit is a term deposit placed with a company or NBFC rather than a bank. You deposit a lump sum for a fixed period at a rate agreed at the outset, and the company pays interest and repays the principal at maturity. Rates are generally higher than bank deposits because the deposit is not covered by deposit insurance and repayment depends on the company.
An NCD is a security. It is usually listed, held in your demat account, and can in principle be sold on the exchange before maturity. A corporate fixed deposit is not a security — it is a deposit placed directly with the company, evidenced by a receipt, and it cannot be sold, only withdrawn early on restricted terms. Both depend on the same thing: the issuing company being able to pay.
No. DICGC deposit insurance covers deposits with banks, up to the prescribed limit per depositor per bank. It does not cover fixed deposits accepted by companies or NBFCs. If the company cannot repay, there is no insurance scheme standing behind your money. This is the single most important difference from a bank fixed deposit.
Because you are taking on more risk. Neither is covered by deposit insurance, and repayment depends on the financial health of the issuing company rather than a bank. The higher rate is compensation for that. A rate noticeably above the market usually reflects a lower credit rating rather than a better deal.
NCDs are listed and regulated, and secured NCDs are backed by a charge on the issuer's assets, but they are not risk-free. Repayment depends entirely on the issuer being able to pay. If the issuer defaults you can lose interest, capital, or both. The credit rating is the most important indicator, and ratings can be downgraded during the life of the NCD.
A secured NCD is backed by a charge on specific assets of the issuer, so secured holders rank ahead of unsecured creditors if the issuer defaults. An unsecured NCD has no such backing and ranks behind secured creditors. Unsecured NCDs usually offer a higher coupon, and that higher coupon is compensation for the higher risk.
A credit rating is an agency's opinion on how likely the issuer is to make payments on time. AAA indicates the highest degree of safety, and the safety indicated falls as you move down through AA, A and BBB. BBB is the lowest investment-grade band. Ratings below that carry materially higher default risk. A rating is an opinion, not a guarantee, and it can be revised.
Interest from all three is added to your income and taxed at your applicable slab rate, whether it is paid out periodically or accumulated. In a cumulative corporate deposit, interest is taxable as it accrues each year rather than only at maturity. If you sell a listed bond or NCD before maturity, any gain is treated as a capital gain instead. Please consult a tax professional for your own position.
A listed bond or NCD can be sold on the exchange, but many corporate issues trade thinly, so you may not find a buyer at a price you consider fair. A corporate fixed deposit cannot be sold at all — premature withdrawal is restricted, with a minimum lock-in during which no withdrawal is permitted and a reduced rate or penalty after that. Plan to hold all three to maturity.
In a cumulative option the interest accumulates and is paid along with the principal at maturity, so it compounds through the tenure. In a payout option the interest is paid out at a chosen interval — monthly, quarterly, half-yearly or annually. Cumulative suits investors who do not need the income now; a payout option suits those who need regular income.
Tell our team how much you want to invest, for how long, and whether you need regular income or would prefer the interest accumulated. We will show you what is available across bonds, NCDs and corporate deposits, with the credit rating alongside the rate in every case, and handle the application and paperwork. Call +91 730 4343 927 or book an appointment.
Tell us how much you want to invest, for how long, and whether you need monthly income. We will show you what is available across bonds, NCDs and corporate deposits, with the credit rating alongside the rate in every case. There is no fee to you for that conversation.
