Company debt, 7.5-10% yield by credit rating. AAA safest to D default. NCDs. Bond platforms (GoldenPi, Wint). Stick to AAA/AA. Slab tax. Diversify + check ratings.
CORPORATE BONDS = debt issued by COMPANIES to raise funds. Pay PERIODIC INTEREST (coupon) + principal at maturity. KEY: (1) HIGHER YIELD than G-Secs (credit risk premium). (2) CREDIT RATING (AAA safest to D default). (3) NCDs (Non-Convertible Debentures) common form. (4) 7.5-10% yield by rating. (5) Listed on NSE/BSE or private placement. (6) Min ₹1,000-10,000. STRATEGIC: higher income than government bonds but credit risk. Rating critical.
BOND CREDIT RATINGS (CRISIL, ICRA, CARE): (1) AAA: highest safety, lowest yield (7.5-8.5%). (2) AA: high safety (8-9%). (3) A: adequate safety (8.5-9.5%). (4) BBB: moderate (9-11%). (5) BB and below: speculative/junk (high yield, high risk). (6) D: default. KEY: lower rating = higher yield = higher default risk. STRATEGIC: retail investors STICK TO AAA/AA. Avoid below A (default risk). DHFL/IL&FS defaults showed lower-rated bond risk. Diversify + check rating history.
FIXED INCOME COMPARISON: (1) G-SECS: 7-7.5%, ZERO credit risk (government). (2) AAA CORPORATE: 7.5-8.5%, low credit risk. (3) AA CORPORATE: 8-9.5%, moderate risk. (4) BANK FD: 6.5-7.5%, insured ₹5L, bank risk. (5) TAX-FREE PSU BONDS: 5.5-6.5% tax-free (effective higher). STRATEGIC: (a) Safety-first: G-Secs/AAA. (b) Higher yield: AA (accept some risk). (c) Tax-conscious: tax-free PSU bonds. Ladder + diversify across issuers + ratings.
CORPORATE BOND TAX: (1) INTEREST (coupon): TAXABLE at slab rate. (2) TDS 10% if interest over ₹5K (listed) — Section 193. (3) CAPITAL GAINS on sale: (a) Listed bonds held 1+ year: LTCG 12.5%. (b) Under 1 year: STCG slab. (c) Unlisted: 2-year for LTCG. (4) NO indexation (post-2024 for most). TAX-FREE PSU BONDS: interest tax-free. STRATEGIC: regular corporate bond interest taxed at slab (less efficient for high earners). Tax-free PSU bonds better for HNW. Hold listed bonds 1+ year for LTCG on price gains.
CORPORATE BOND STRATEGY: (1) STICK TO AAA/AA for retail. (2) DIVERSIFY across issuers (avoid concentration). (3) CHECK rating + history + financials. (4) AVOID junk bonds (below A) — default risk. (5) LADDER maturities. (6) BOND PLATFORMS (GoldenPi, Wint Wealth, BondsKart) for retail access. (7) TAX-FREE PSU bonds for HNW (tax efficiency). (8) NCDs from reputed issuers. (9) INTEREST RATE risk (prices fall when rates rise). (10) HOLD TO MATURITY for predictable return. (11) 10-30% of debt allocation. STRATEGIC: corporate bonds boost fixed-income yield over G-Secs/FD. But credit risk real (DHFL/IL&FS lessons). Quality + diversification critical. CONSULT for large allocations.