What is Bonds And Government Securities ?
A government security is a bond issued by a government authority with a promise of repayment upon maturity, government securities such as treasury bills, savings bonds, and notes also promise periodic coupon or interest payments. These securities are considered a low risk since they are backed by the taxing power of the government.
What are Infrastructure Bonds?
Infrastructures bonds are borrowing that are invested in Government funded infrastructure project within a country. These bonds are issued by the government of or can be issued government authorized Infrastructure organizations or non-banking financial organization.
Functionality of Infrastructure Bond
Infrastructure bond, are useful for individuals who require a fixed income. Offer a better than average rate of interest and tax reductions, development of these bonds is between 10 to 15 years with an alternative to buying back after a secure of 5 years. Infrastructure bonds are listed either on both BSE or NSE Exchange that gives you a choice to exit after the secure period, where no-one can sell a specific amount in a lock-in period.
What are the tax benefits?
– When investment up to Rs. 200000 are deserving for income tax deduction under section 80 CCF Act
– Amount of one lakh deduction available under Section 80 C
– Bonds is applicable on interest income if the annual interest is less than Rs. 5000 then no tax is deductible.
Why should you invest in bonds?
- Bonds are a debt security under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay the interest or repay the principal at a later date, which is termed the maturity.
- The volatility of bonds especially short and medium-dated bonds are lower than stocks, then bonds are generally viewed as safer investments than stocks.
- Bonds are often liquid it is fairly easy for an institution to sell a large number of bonds without affecting the price much.
- Bondholders having a measure of legal protection under the law of the country.
- If a company goes bankrupt, its bondholders will often receive some money back the recovery amount.
- There are also a variety of bonds to fit different needs of investors.
What is Capital Gains Bonds
A profit that results from a sale of a capital asset, such as stock, bond or real estate, where the sale price exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price, so a capital loss arises if the proceeds from the sale of a capital asset are less than the purchase price.
Main Key Points of Capital Gains
– Long-term capital loss
– Short-term capital loss
– Long-term capital gains
– Short-term capital gains
– Expenditure of transfer or sale
– The holding period of capital assets
What Is a Government Security ?
A government security is a bond issued by a government authority with a promise of money paid back upon maturity, these securities are considered as a low risk since they are backed by the taxing power of the government. Government securities such as savings bonds, treasury bills, and notes also promise or interest payments.
Why Are They Issued ?
Government securities are usually issued for two different reasons. The primary reason that most government securities are issued is to raise funds for government expenditures. The government issues treasury securities to cover shortfalls (deficits) in its annual budget. Additionally, cities will often issue bonds for construction of schools, libraries, stadiums, and other public infrastructure programs.
Types of Government Securities
– Treasury Bills
– Partly paid stock
– Zero coupon bonds
– Floating rate bonds
– Capital indexed bonds
– Cash Management Bills
– State Development Loans
– Dated Securities With a Fixed Maturity Date
A financial instrument issued by the government agencies, for raising capital is known as Bonds, but financial instrument issued by the companies where it is public or private for raising capital is known as Debentures.
Face value, referred as par value or nominal value, as shown on the security certificate, including currency, and concept most commonly applies to stocks and bonds, so it is particularly important to bond and preferred stock investors.
– Lock in for 3 years and non-transferable.
– A rate of Interest 5.25% p.a. payable annually.
– Bonds can be held in Demat or Physical Form.
– Interest is taxable although no TDS is deducted.
– Minimum investment of single Bond amounting of Rs. 10,000/-
– The Bonds will automatically redeem after the expiry of three years.
– Maximum investment of 500 Bonds amounting to 50 lakhs in a Financial Year.
Yield to maturity is the total return anticipated on a bond if the bond is held until it matures is considered a long-term bond yield but is expressed as an annual rate. It is the internal rate of return of an investment in a bond if the investor holds the bond until maturity and if all payments are made as scheduled.