Question 1

What are bonds?

Accepted Answer

Fixed income instruments issued by companies or governments — you give money and get regular interest plus principal back at maturity.

Question 2

Bonds vs FD?

Accepted Answer

Higher potential returns and tradability; FDs lock you into one bank with exit penalties.

Question 3

What is YTM?

Accepted Answer

Total annualised return if held till maturity, combining interest income and any capital gain or loss.

Question 4

How safe are bonds?

Accepted Answer

Depends on credit rating and issuer quality; government bonds are safest.

Question 5

What is a credit rating?

Accepted Answer

Risk indicator from AAA to D, assigned by SEBI-accredited rating agencies like CRISIL, ICRA and CARE.

Question 6

How do I buy bonds?

Accepted Answer

Either through your existing broker or demat account on NSE or BSE, or via an OBPP, which requires creating a separate account.

Question 7

Can I sell before maturity?

Accepted Answer

Yes, on the exchange, just like equity; price may differ from face value.

Question 8

How are bonds taxed?

Accepted Answer

Interest income is taxed at slab rate. Capital gains are taxed at LTCG (12.5%, over 12 months holding) or STCG (at slab rate, under 12 months holding).

Question 9

What is accrued interest?

Accepted Answer

Interest earned but not yet paid; it is added to the clean price to form the traded (dirty) price.

Question 10

What is coupon rate?

Accepted Answer

The fixed annual interest rate the issuer pays on the bond's face value.

Question 11

What is a zero-coupon bond?

Accepted Answer

No periodic interest — all returns are paid as a lump sum at maturity.

Question 12

Clean price vs dirty price?

Accepted Answer

Clean price excludes accrued interest; dirty price, which is what you actually pay, includes it.

Question 13

Minimum investment amount?

Accepted Answer

₹100 for government securities and ₹1,000 for corporate bonds.

Question 14

Do I need an OBPP account?

Accepted Answer

No. You can buy bonds directly from NSE or BSE using your existing equity broker without any OBPP.

Question 15

NSE/BSE vs OBPP — which is better?

Accepted Answer

Exchanges offer transparent pricing, guaranteed settlement and zero commission; OBPPs sell from their own inventory at a margin.

Question 16

Why is my payout lower than the quoted yield?

Accepted Answer

Your yield is fixed and does not change. However, TDS is deducted on interest payments, which can be claimed when filing returns.

Question 17

Secured vs unsecured bonds?

Accepted Answer

Secured bonds are backed by specific issuer assets; unsecured bonds (debentures) are not.

Question 18

What are callable bonds?

Accepted Answer

The issuer can redeem early, usually when rates fall — coupons stop once called.

Question 19

What are convertible bonds?

Accepted Answer

They can convert into a fixed number of the issuer's equity shares.

Question 20

What risks do bonds carry?

Accepted Answer

Mainly credit (default) risk, plus liquidity, interest-rate and reinvestment risk if sold early.

Question 21

Will I get my money back if the issuer defaults?

Accepted Answer

Not guaranteed — secured holders get a priority claim on collateral, but recovery is not certain or immediate.

Question 22

How do I choose which bond to invest in?

Accepted Answer

Compare rating, tenure and YTM; then check security type, liquidity and issuer financials.

Question 23

How do I receive payouts?

Accepted Answer

Interest and principal are credited directly to your demat-linked bank account per the payout schedule.

Question 24

What happens at maturity?

Accepted Answer

Principal plus final interest is auto-credited to your bank account — no action needed.

Question 25

Is TDS deducted on bond interest?

Accepted Answer

Yes, 10% TDS, adjustable against your total tax liability via Form 16 or 26AS.

Question 26

Can I get zero or lower TDS?

Accepted Answer

Yes, by submitting Form 121 if your income is below the taxable threshold.

Question 27

Are there tax-saving bonds?

Accepted Answer

Yes. 54EC bonds save LTCG tax on property-sale gains, with a ₹50 lakh cap and a five-year lock-in.

Question 28

Are tax-free bonds really tax-free?

Accepted Answer

Interest is fully exempt; only capital gains on early sale are taxed.

Question 29

How do I report bond income in ITR?

Accepted Answer

Interest under “Income from Other Sources”; capital gains under the “Capital Gains” section.

Question 30

Bond price vs yield relationship?

Accepted Answer

Inversely related — price up means yield down, and vice versa.

Question 31

What are the main types of bonds?

Accepted Answer

G-Secs, SDLs, PSU bonds, corporate bonds, tax-free bonds, SGBs, and convertible and callable bonds.

Question 32

Who should invest in bonds?

Accepted Answer

Anyone wanting fixed, predictable returns — individuals, HUFs, trusts and corporates alike.

Question 33

How much of my portfolio should be in bonds?

Accepted Answer

A commonly followed principle is a fixed-income percentage roughly equal to your age.

Question 34

Can I invest in multiple bonds?

Accepted Answer

Yes — you can hold several bonds and sell them individually.

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