Bonds Under 10,000

More About Bonds Under ₹10,000

Bonds under ₹10,000 are debt investment options that can be purchased with an investment amount of ₹10,000 or less. They allow investors to participate in the bond market with a relatively smaller amount of capital.

In July 2024, SEBI introduced provisions allowing eligible privately placed debt securities to be issued with a face value of ₹10,000, subject to specified conditions. This was an important step towards making the corporate bond market more accessible to individual investors.

Apart from newly issued bonds, some listed bonds may also be available at prices below their face value in the secondary market. This means investors may find opportunities to invest in bonds at different price points, depending on market conditions and availability.

What Are Bonds Under ₹10,000?

Bonds under ₹10,000 are bonds that can be purchased with an investment amount of up to ₹10,000. These may include eligible corporate bonds, Non-Convertible Debentures (NCDs) and other listed debt securities available at this investment level.

When you invest in a bond, you are lending money to the issuer in return for interest payments, as specified in the bond's terms. The principal amount is generally repayable at maturity, subject to the issuer meeting its obligations.

These bonds can be a useful starting point for investors who want to understand how bond investments work without committing a large amount at the beginning.

Types of Bonds You Can Buy at This Ticket Size

With an investment amount of ₹10,000 or less, you may find different types of bonds depending on their issue price, face value and availability in the market.

Here are some of the bond categories you can explore:

Note: Not every bond in these categories is available below ₹10,000. The minimum investment depends on the individual bond's denomination, market price and available quantity.

Understanding Zero-Coupon Bonds

Zero-coupon bonds are different from regular bonds because they do not pay interest periodically. Instead, they are generally available at a price lower than their redemption value.

For example, suppose a zero-coupon bond has a redemption value of ₹10,000 and is available at ₹9,000. If held until maturity and redeemed as scheduled, the difference of ₹1,000 represents the investor's pre-tax gain.

These bonds may be suitable for investors who prefer to receive their returns at maturity rather than through regular interest payments.

What to Look For Before Investing

Even when you are investing a smaller amount, it is important to understand the bond before making a decision.

Here are six important factors to consider:

1. Credit Rating: Check the bond's credit rating to understand its credit risk. AAA is the highest rating category, while lower ratings indicate relatively higher credit risk. Ratings are opinions and do not guarantee repayment.
2. Issuer's Financial Position: Understand the company's financial performance, debt levels and ability to meet its repayment obligations.
3. Investment Tenure: Check the maturity date and choose a bond that matches your investment horizon and financial requirements.
4. Yield to Maturity (YTM): Look beyond the coupon rate. YTM helps estimate the annualised return based on the bond's current price and expected cash flows, assuming payments are made as scheduled and the bond is held until maturity.
5. Liquidity: Check whether the bond is actively traded in the secondary market. Lower trading activity may make it difficult to sell before maturity at your preferred price.
6. Secured or Unsecured: Understand whether the bond is backed by specific assets. Secured bonds may have a claim over specified assets, subject to the security structure and applicable recovery priorities.

Risks to Understand Before Investing

A smaller investment amount does not mean lower investment risk. Like other fixed-income investments, bonds under ₹10,000 also carry certain risks.

Here are three important risks to keep in mind:

1. Credit Risk: The issuer may delay or fail to make interest payments or repay the principal amount. A bond's credit rating may also change over time depending on the issuer's financial position.
2. Liquidity Risk: Some bonds may have limited buyers and sellers in the secondary market. If you want to sell before maturity, you may not find a buyer immediately or may have to sell at a lower price.
3. Interest Rate Risk: Bond prices generally move in the opposite direction to market interest rates. When interest rates rise, existing bond prices may fall. This is particularly relevant if you plan to sell your bond before maturity.

Understanding these risks can help you compare different bonds and make investment decisions based on your financial goals and risk appetite.

How to Invest in Bonds Under ₹10,000 on GoldenPi

Getting started with bond investments on GoldenPi is simple. You can explore available bonds, compare their features and invest online.

Follow these steps:

1. Create Your Account: Visit GoldenPi and log in to your account. Complete your KYC verification if you are a new investor.
2. Explore Bonds: Visit the Bonds Under ₹10,000 section to discover available investment opportunities.
3. Compare Your Options: Use filters such as credit rating, issuer, YTM and maturity period to find bonds that match your preferences.
4. Check Bond Details: Review the bond's current price, coupon rate, credit rating, maturity date, payment frequency and other important details before investing.
5. Place Your Investment: Select your preferred bond, enter the investment quantity and complete the payment using the available payment options.
6. Receive Bonds in Your Demat Account: Once the transaction is successfully settled, the purchased bonds are credited to your registered NSDL or CDSL demat account.

GoldenPi makes it easier to explore and compare different bond investment opportunities through a single online platform.

Taxation on Bonds Under ₹10,000

The tax treatment of bonds depends on the type of bond, the income earned and the applicable tax provisions.

Here are the key things investors should know:

1. Tax on Interest Income

Interest earned from most taxable bonds is added to your total income and taxed according to your applicable income-tax slab.

2. Tax Deducted at Source (TDS)

TDS may apply to interest earned on securities. Under the applicable provisions, the general threshold for TDS on interest on securities is ₹10,000 during a financial year, subject to relevant conditions and exemptions. The applicable deduction rate and rules depend on the investor and the nature of the security.

3. Tax on Capital Gains

If you sell a bond before maturity or earn a gain on redemption, capital gains tax may apply.

For listed bonds, gains are generally treated as long-term if the holding period exceeds 12 months. Long-term capital gains are generally taxed at 12.5% without indexation. Short-term gains are generally taxed at the applicable income-tax slab rates.

Unlisted bonds and certain special categories may have different tax treatment.

4. Tax on Zero-Coupon Bonds

Zero-coupon bonds do not provide periodic interest income. Their gains are generally considered under the applicable capital gains provisions, depending on the instrument's classification and holding period.

5. Tax on Tax-Free Bonds

Interest from eligible tax-free bonds is exempt from income tax under the applicable provisions. However, capital gains arising from selling these bonds may still be taxable.

Note: Tax rules are subject to change. The actual tax treatment depends on the security, investor's residential status and applicable income-tax provisions. Investors should consult a tax professional for advice based on their individual circumstances.

Start Your Bond Investment Journey with ₹10,000 or Less

You don't need a large investment amount to explore the bond market. Bonds under ₹10,000 make it easier to take your first step into fixed-income investing while giving you access to different issuers, interest payment options and maturity periods.

Whether you are a first-time investor or looking to diversify your existing portfolio, you can explore bonds based on your investment goals, preferred tenure and risk appetite.

At GoldenPi, you can compare available bonds, review important investment details and make informed investment decisions through a simple online process.

Explore Bonds Under ₹10,000 on GoldenPi and take your next step towards building a diversified investment portfolio.