Corporate bonds investment for steadier income
Bonds pay a fixed rate of interest and return your principal at maturity — provided the issuer can pay. Learn how bond prices, yields and credit ratings work, how bonds compare with FDs and debt funds, and how they are taxed.
- Ratings, yields and risks explained plainly
- Access via SEBI-registered bond platforms
- Office at Ghanta Ghar, Dehradun
Lower volatility, steadier income — built for stability
A bond is a loan you make to a company or the government
When you buy a corporate bond, you lend money to the issuer — a bank, a PSU, an NBFC or a company. In return, the issuer promises to pay interest at a fixed rate and to repay your principal on a set date. If the issuer runs into trouble, those payments can be delayed or lost, which is why the credit quality of the issuer matters more than anything else in corporate bonds investment.
Four terms explain almost every bond:
- Face value — the amount repaid at maturity, often ₹1,000, ₹10,000 or ₹1 lakh per bond.
- Coupon — the fixed annual interest rate on face value, paid monthly, quarterly, half-yearly or yearly.
- Maturity — the date the principal is repaid.
- Yield to maturity (YTM) — the annualised return if you buy at today's price, hold to maturity and the issuer pays everything on time.
Price and yield move in opposite directions
A bond's coupon never changes, but its market price does. When interest rates in the economy rise, older bonds with lower coupons become less attractive and their prices fall, pushing their yield up to match the market. When rates fall, prices rise.
The longer the remaining maturity, the larger the price swing. If you hold to maturity and the issuer pays in full, interim price moves do not change what you receive.
The credit rating ladder: from AAA to default
SEBI-registered credit rating agencies grade bonds using a common scale. Ratings are opinions about the issuer's ability to pay on time — useful, but not guarantees, and they can be downgraded.
| Rating | What it indicates | Grade |
|---|---|---|
| AAA | Highest degree of safety; lowest credit risk | Investment grade |
| AA | High degree of safety; very low credit risk | Investment grade |
| A | Adequate degree of safety; low credit risk | Investment grade |
| BBB | Moderate degree of safety; moderate credit risk | Lowest investment grade |
| BB | Moderate risk of default | Speculative |
| B | High risk of default | Speculative |
| C | Very high risk of default | Speculative |
| D | In default or expected to default | Default |
Agencies may add + or − to show relative standing within a category.
Where bond yields stand
Indicative market yields as of 3 Sep 2026, taken before the RBI's 7 Oct 2026 repo rate hike. Actual yields on any bond depend on its issuer, rating, maturity and market conditions on the day you buy.
| Instrument | Indicative yield |
|---|---|
| AAA corporate bond, 3-year | 7.36% |
| AAA corporate bond, 5-year | 7.50% |
| AA corporate bond, 5-year | 8.27% |
| Government security, 5-year | 6.63% |
| Government security, 10-year | 7.09% |
As of 3 Sep 2026 · before the RBI's 7 Oct 2026 repo hike · indicative only
Notice the gap between AAA and AA yields at the same five-year maturity: that extra yield is the compensation the market demands for slightly higher credit risk. The gap between AAA corporate bonds and government securities is the price of moving from sovereign to corporate credit.
How individuals can buy bonds in India
Online Bond Platform Providers
OBPPs are SEBI-registered platforms where you can buy listed corporate bonds and NCDs. SEBI has cut the minimum face value of privately placed listed debt to ₹10,000, opening bonds to smaller investors. Bonds settle into your demat account.
RBI Retail Direct
RBI's Retail Direct portal lets individuals open a free gilt account and buy government securities, treasury bills and state development loans directly, in primary auctions and the secondary market.
Public NCD issues
Companies occasionally make public issues of non-convertible debentures, which you can apply for through your broker or bank, much like an IPO, and then trade on the exchange.
If you would like to buy bonds, we can help you understand the options and how to access them through SEBI-registered platforms or RBI Retail Direct. We do not recommend any particular bond or issuer.
54EC capital gain bonds, RBI Floating Rate Savings Bonds and SGBs
54EC capital gain bonds
Sold a plot, flat or building at a long-term capital gain? Investing the gain in these bonds within six months of the sale can exempt it from tax. Under the Income-tax Act, 2025, the exemption is now Section 85 (earlier Section 54EC).
- Issuers: REC, PFC, IRFC and HUDCO
- Interest: 5.25% a year, taxable
- 5-year lock-in; not transferable
- Up to ₹50 lakh per financial year
RBI Floating Rate Savings Bonds
Seven-year bonds issued by the Government of India, with a rate reset every six months at 0.35% above the prevailing NSC rate. Interest is paid half-yearly and is taxable at your slab rate.
- Rate for Jul–Dec 2026: 8.05%
- Premature exit allowed only for senior citizens, after a minimum period
Sovereign Gold Bonds
There have been no new SGB issues since February 2024. Existing SGBs can be held to maturity, redeemed in RBI's premature-redemption windows, or bought and sold on stock exchanges, where prices may differ from the gold price.
Bonds vs FD: which suits what?
All three can give steadier income than equity, but they differ on safety net, liquidity and tax.
| Feature | Corporate bond | Bank FD | Debt mutual fund |
|---|---|---|---|
| Return | Fixed coupon; YTM depends on price paid | Fixed rate for the term | Market-linked; varies with yields and credit |
| Safety net | None; depends on issuer's credit | DICGC cover up to ₹5 lakh per depositor per bank | Diversified across many issuers; no guarantee |
| Liquidity | Sell on exchange if a buyer exists | Premature withdrawal, usually with a penalty | Redeem units, usually in 1–2 working days |
| Minimum | Often ₹10,000 per bond | Often ₹1,000 or less | Often ₹100–₹1,000 |
| Interest/income tax | Interest at slab rate | Interest at slab rate; TDS may apply | Gains at slab rate (units bought on/after 1 Apr 2023) |
| Capital gains | Listed, held >12 months: 12.5%; unlisted: slab | Not applicable | Slab rate |
Debt funds spread money across dozens of bonds and are managed professionally, which reduces single-issuer risk. Learn more on our debt mutual funds and bonds page.
How bonds are taxed
Interest from corporate bonds, PSU bonds and government securities is added to your income and taxed at your slab rate. TDS may be deducted on interest from listed bonds above the threshold.
Listed bonds sold after more than 12 months give long-term capital gains, taxed at 12.5% without indexation. Sold sooner, the gain is short-term and taxed at your slab rate.
Unlisted bonds and debentures are always taxed at your slab rate on gains, whatever the holding period.
Risks every bond investor should know
- Credit risk: the issuer may delay or miss interest or principal. Ratings can be downgraded.
- Liquidity risk: many bonds trade rarely, so you may not find a buyer at a fair price before maturity.
- Interest-rate risk: if rates rise, the market price of your bond falls.
- Reinvestment risk: when coupons or principal come back, rates may be lower than before.
- Call risk: some bonds let the issuer repay early, often when rates have fallen, cutting your income short.
Using bonds for regular income
Retirees and families in Dehradun often look for a predictable monthly cheque. Some corporate bonds and NCDs offer a monthly interest option, and a "ladder" of bonds maturing in different years can spread out cash flows and reduce reinvestment risk. Before chasing a higher monthly payout, compare it with alternatives such as the Senior Citizens Savings Scheme, the Post Office Monthly Income Scheme or a systematic withdrawal from a debt fund — all covered in our guide to investment options in India.
Whatever you choose, keep any single issuer to a modest share of your portfolio, prefer high-rated paper for money you cannot afford to lose, and match each bond's maturity to when you will need the money. Visit us near Ghanta Ghar, or reach us on WhatsApp from anywhere in Uttarakhand or Delhi NCR, for a plain-language walk-through. You can also contact us to request a call back.
Frequently asked questions
Are corporate bonds safer than fixed deposits?
Not necessarily. Bank FDs are covered by DICGC deposit insurance up to ₹5 lakh per depositor per bank; corporate bonds have no such cover. A bond's safety depends on the issuer's ability to pay, which is what its credit rating tries to assess. AAA-rated PSU bonds are considered very high quality, but even they carry some credit, liquidity and interest-rate risk.
What is the minimum amount to invest in corporate bonds?
For privately placed listed debt securities, SEBI has reduced the minimum face value to ₹10,000, so many bonds on SEBI-registered Online Bond Platform Providers can be bought from around ₹10,000. Government securities can be bought through RBI Retail Direct in small amounts.
What are 54EC bonds and are they still available?
Yes. Capital gain bonds issued by REC, PFC, IRFC and HUDCO let you save tax on long-term capital gains from selling land or a building, if you invest within six months of the sale. Under the Income-tax Act, 2025, the exemption is now in Section 85 (earlier Section 54EC). They currently pay 5.25%, have a 5-year lock-in and a limit of ₹50 lakh per financial year.
How are corporate bonds taxed?
Interest is added to your income and taxed at your slab rate. If you sell a listed bond after holding it for more than 12 months, the gain is long-term and taxed at 12.5% without indexation; sooner, it is taxed at your slab rate. Gains on unlisted bonds are always taxed at your slab rate.
Why do bond prices fall when interest rates rise?
A bond's coupon is fixed. When new bonds start paying higher interest, existing bonds with lower coupons become less attractive, so their market price falls until their yield matches the market. The longer the bond's remaining maturity, the bigger the price change.
Can I get monthly income from bonds?
Some corporate bonds and NCDs offer a monthly interest option, while many PSU bonds pay annually. You can also build a ladder of bonds with different payment dates. Remember that higher-yielding bonds usually carry higher credit risk, and that interest is taxable at your slab rate.
Are Sovereign Gold Bonds still issued?
No new Sovereign Gold Bond tranches have been issued since February 2024. Existing SGBs can be held to maturity, redeemed during RBI's premature-redemption windows, or bought and sold on stock exchanges.
Ready to start your investment journey?
Visit us at Ghanta Ghar, Dehradun, or talk to us on WhatsApp. We serve investors across Uttarakhand and Delhi NCR.