A Market Linked Debenture is a debt instrument whose return is linked to the performance of an underlying index or asset, such as the Nifty 50 or gold, rather than to a fixed coupon. DhanTarang distributes MLDs issued through Anand Rathi Digital Wealth and Nuvama Partners.
A Market Linked Debenture (MLD) is a non-convertible debenture issued by a company or NBFC whose return is linked to the performance of an underlying market index or asset — commonly the Nifty 50, a government security or gold — instead of paying a fixed rate of interest. MLDs are listed debt instruments regulated by SEBI, and they are classified as structured products because they combine a debt instrument with a market-linked payoff.
The payoff is defined in advance in the term sheet. It sets out the underlying, the observation dates, the level the underlying must hold or reach, and the return the investor receives in each scenario. Nothing about the payoff is discretionary — it either meets the stated condition or it does not.
An NBFC or corporate issues the debenture and publishes a term sheet setting out the underlying index or asset, the tenure, the observation dates and the payoff in each scenario.
MLDs are held to maturity, typically for 3.5 to five years. The instrument is listed, but secondary market trading in MLDs is generally thin.
On the dates stated in the term sheet, the level of the underlying is checked against the condition set out in the structure.
If the stated condition is met, you receive the return defined in the term sheet. If it is not, you receive the alternative outcome the term sheet specifies, which may be a lower return or principal only.
Every outcome above assumes the issuer is able to pay at maturity. The credit rating of the issuer is the single most important thing to check before investing.
| Type | How the Structure Works |
|---|---|
| Principal Protected MLD | The structure is designed to return the face value at maturity, with any additional return depending on the performance of the underlying. |
| Non-Principal Protected MLD | Both the return and the capital depend on how the underlying performs against the stated condition. |
| Equity-Linked MLD | The payoff is linked to an equity index such as the Nifty 50, or to a basket of stocks. |
| Commodity or G-Sec Linked MLD | The payoff is linked to gold, another commodity, or a government security. |
The return is tied to the performance of a defined underlying index or asset, and the payoff for each scenario is set out in the term sheet before you invest.
You know the tenure, the observation dates and the outcome in each scenario at the outset. MLDs are designed to be held to maturity, typically for 3.5 to five years.
Some MLDs are structured to return the face value at maturity. This protection comes from the structure of the instrument and depends on the issuer being able to pay. It is not a guarantee.
An MLD behaves differently from a fixed deposit or a debt fund, which is why some investors use it for diversification. Different does not mean better, and the outcome depends entirely on the structure and the issuer.
Under Section 50AA of the Income Tax Act, introduced by the Finance Act 2023, gains on Market Linked Debentures transferred, redeemed or maturing on or after 1 April 2023 are deemed to be short-term capital gains and are taxed at the investor's applicable slab rate, regardless of how long the MLD was held.
Before this change, MLDs held for more than twelve months attracted a concessional long-term capital gains rate, and tax treatment was often cited as a reason to choose them. That advantage no longer exists. An MLD should be assessed today on its structure, its payoff and the credit quality of its issuer — not on tax treatment.
Tax treatment depends on your personal circumstances and on the rules in force at the time. Please consult a qualified tax professional before making a decision based on tax treatment.
An MLD is an obligation of the issuing company or NBFC. If the issuer cannot pay at maturity, you may not receive your return or your principal. Check the credit rating and the issuer before the structure.
MLDs are listed, but secondary market trading is generally thin. Assume you will hold to maturity, and do not commit money you may need before then.
The return depends on the underlying meeting a defined condition on defined dates. A small miss on an observation date can change the outcome materially. Read the term sheet in full.
MLDs do not carry an assured or guaranteed return. Depending on the structure, the outcome can be lower than a comparable fixed-income instrument, and in non-principal-protected structures you can receive less than you invested.
These three are often compared because all are used for the non-equity part of a portfolio. They behave very differently.
| Feature | Market Linked Debentures | Fixed Deposits | Debt Mutual Funds |
|---|---|---|---|
| Return | Linked to an underlying index or asset, per the term sheet | Fixed and known at the time of deposit | Market-linked, varies with interest rates |
| Principal | Depends on structure and on the issuer paying at maturity | Repaid by the bank, with deposit insurance up to the prescribed limit | Market-linked, no assurance |
| Liquidity | Listed but thinly traded; designed to be held to maturity | Premature withdrawal usually carries a penalty | Redeemable on any business day |
| Tenure | Typically 3.5 to 5 years | Chosen at the time of deposit | Open-ended |
| Taxation | Deemed short-term capital gains, taxed at slab rate | Interest taxed at slab rate | Taxed at slab rate |
| Complexity | High — requires reading a term sheet | Low | Moderate |
MLDs suit a narrow set of HNI investors.
MLDs are generally used as a small allocation alongside a core portfolio, not as a first or primary investment.
The tenure runs 3.5 to five years and the secondary market is thin. The money committed should be money you will not need in that period.
The outcome is defined entirely by the structure. If reading and understanding the payoff scenarios is not something you want to do, a simpler instrument is the better choice.
DhanTarang Fintech Pvt. Ltd. distributes Market Linked Debentures. The debenture is an obligation of the issuer, not of DhanTarang. Our role is to help you understand what you are buying and to handle the process.
We walk through the underlying, the observation dates, the payoff in each scenario, the tenure and the issuer credit rating, so you know the outcome in every case before you commit.
KYC, demat requirements, the application and allotment. We coordinate the process end to end.
Your MLDs sit alongside your Mutual Funds, PMS, AIF, Bonds and NCDs on the DhanTarang platform, so you see the whole picture in one place.
A Market Linked Debenture is a debt instrument issued by a company or NBFC where the return is linked to the performance of an underlying index or asset, such as the Nifty 50 or gold, instead of paying a fixed rate of interest. The payoff for each scenario is set out in the term sheet before you invest. MLDs are listed debt instruments regulated by SEBI.
Under Section 50AA of the Income Tax Act, introduced by the Finance Act 2023, gains on MLDs transferred, redeemed or maturing on or after 1 April 2023 are deemed to be short-term capital gains and taxed at the investor's applicable slab rate, regardless of the holding period. The concessional long-term capital gains treatment that applied earlier is no longer available, so tax efficiency is no longer a reason to choose an MLD.
A principal protected MLD is structured so that the face value is returned at maturity, with any additional return depending on how the underlying performs. This protection comes from the structure of the instrument and depends on the issuer being able to pay at maturity. It is not a guarantee, and no third party stands behind it. If the issuer defaults, the principal is at risk.
MLDs are listed, regulated by SEBI and issued with a defined payoff, so the structure is transparent. However, they carry issuer credit risk, they are thinly traded in the secondary market, and the return depends on the underlying meeting a defined condition. Returns are not assured, and in non-principal-protected structures you can receive less than you invested.
MLD tenures typically range from 3.5 to five years. MLDs are designed to be held to maturity. They are listed on an exchange, but secondary market trading is generally thin, so you should not rely on selling before maturity.
The minimum depends on the face value of the particular issue and on the issuer. Speak to our team for the minimum applicable to the MLDs currently on offer.
A fixed deposit pays a rate that is fixed and known at the time of deposit, and bank deposits carry deposit insurance up to the prescribed limit. An MLD pays a return linked to an underlying index or asset, as defined in its term sheet, and repayment depends on the issuer. An MLD is a more complex instrument with a longer commitment and no assured return.
MLDs are listed, so a sale is technically possible, but secondary market volumes are generally low and you may not find a buyer at a price you consider fair. Treat an MLD as a hold-to-maturity investment and commit only money you will not need during the tenure.
Speak to our team about your objective, your time frame and the amount you are considering. We will take you through the term sheet of the issues currently available, explain the payoff in each scenario and the issuer credit rating, and coordinate KYC, demat and the application. Call +91 7304343927 or book an appointment.
If an MLD is something you are considering, the useful first step is going through a live term sheet together — the underlying, the payoff in each scenario, the tenure and the issuer. There is no fee to you for that conversation, and no obligation to invest.
