Investment is time, energy, or matter spent in the hope of future benefits actualized within a specified date or time frame. Investment has a different meaning in finance from that in economics. In finance, investment is buying or creating an asset with the expectation of capital appreciation, dividends (profit), interest earnings, rents, or some combination of these returns.
Corporate Deposits are loan arrangements where a specific amount of funds is placed on deposit under the name of the account holder. The money placed on deposit earns a fixed rate of interest, according to the terms and conditions that govern the account. The actual amount of the fixed rate can be influenced by such factors at the type of currency involved in the deposit, the duration set in place for the deposit, and the location where the deposit is made.
Corporate Deposit
Benefits of investing in Company Fixed Deposits
- High interest.
- Short-term deposits.
- Lock-in period is only 6 months.
- No Income Tax is deducted at source if the interest income is up to Rs 5,000 in one financial year
- Investment can be spread in more than one company, so that interest from one company does not exceed Rs. 5,000
These are closed ended debt schemes with a fixed maturity date and they invest in debt & money market instruments maturing on or before the date of the maturity of the scheme.
Fixed Maturity Plan
Why FMP
FMPs, are the equivalent of a fixed deposit in a bank, with a little difference. The FMP's returns are only indicated and not 'guaranteed', Since the fund house knows the interest rate that it will earn on its investments, it can provide 'indicative returns' to investors.FMPs are debt schemes, where the corpus is invested in fixed-income securities.
Where do FMP's invest ?
FMPs usually invest in certificate of deposits (CDs), commercial papers (CPs), money market instruments, corporate bonds and sometimes even in bank fixed deposits. Depending on the tenure of the FMP, the fund manager invests in a combination of the above-mentioned instruments of similar maturity. Say if the FMP is for a year, then the fund manager invests in paper maturing in one year.
Tenure of FMPs'
TThe tenure can be of different maturities, from one month to three years. They are closed-ended in nature, which means that once the NFO (new fund offer) closes, the scheme cannot accept any further investment.
These FMP NFOs are generally open for 2 to 3 days and are marketed to corporates and well-heeled, high net-worth individuals. Nevertheless, the minimum investment is usually Rs 5,000 and so a retail investor can comfortably invest too.
FMP's are investment options for sure if you want to park your money for short term. They are more tax efficient and give better post-tax returns. Though returns are not 100% guaranteed, they are almost risk free (remember almost).
These bonds are exempted from income tax and have attractive intrest rate. Since compnay have better credit rating they have better safety on returns, also option of holding bonds in "Demat Form" makes your investment easy to handle and monitor.
54 EC Bonds
Capital Gain be saved Under Sec 54EC or Sec 54F, if the land or property sold is non agriculture. We deal in such bonds which qualify for Sec 54EC Bonds.
- Tax can be saved under Section 54 EC by investing in bonds
- Tax can be saved under Section 54 F by investment in New residential house
To claim Section 54 EC following conditions is to be satisfied.
- Long Term Capital Asset Long term assets means any capital asset held by assessee for more than 3 Years.
- If assesee has sold the Long term capital asset during the previous year and made a long term capital gain then he can invest money of capital gain in Capital gain bonds and can save tax on long term capital gain.
- Assessee here means all type of assessees,like individual,firm company etc.
- Amount to be invested in bonds is only capital gain not net consideration received on sale of long term capital asset
- Amount exempted under this section will be amount of capital gain or amount invested in capital gain bond which ever is lower maximum up to 50Lakh(see note below)
- These Bonds Maturity Period is Three years
- Capital gain bonds eligible under this section are now can be issued only by REC or NABARD
- Bonds can not be pledged ,sold transfer before completion of three year from purchase of bonds ,and in case its transferred then amount capital gain exempted on investment in these bonds will be made taxable in that previous year as Long term capital gain .
- Amount of capital gain should be invested in Capital gain bond within 6 Month from date of transfer/sale of capital asset .
One more good news for you that 50 lakh Limit is for each financial year. As your six month limit is fall in two different Financial years so you can save 50 lakh in fy 2008-09 and 50 lakh in 2009-10.so one can save upto maximum of one crore of capital gain u/s 54EC.
A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture.
Debenture
Debentures have no collateral. Bond buyers generally purchase debentures based on the belief that the bond issuer is unlikely to default on the repayment. An example of a government debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free because governments, at worst, can print off more money or raise taxes to pay these type of debts
A debenture is a document that either creates a debt or acknowledges it, and it is a debt without collateral. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note.
A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital. Senior debentures get paid before subordinate debentures, and there are varying rates of risk and payoff for these categories.
There are two types of debentures:
- Convertible debentures, which are convertible bonds or bonds that can be converted into equity shares of the issuing company after a predetermined period of time. "Convertibility" is a feature that corporations may add to the bonds they issue to make them more attractive to buyers. In other words, it is a special feature that a corporate bond may carry. As a result of the advantage a buyer gets from the ability to convert, convertible bonds typically have lower interest rates than non-convertible corporate bonds.
- Non-convertible debentures, which are simply regular debentures, cannot be converted into equity shares of the liable company. They are debentures without the convertibility feature attached to them. As a result, they usually carry higher interest rates than their convertible counterparts.
A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.
Bonds
At one point in time, every family household had a fixed deposit account. The elder family members would encourage the others to put away some money in FDs as soon as they start earning. In those days, fixed deposits provided a good rate of annual interest. Between 2010 and 2012, the average rate of interest from FDs was around 8.5 – 9%. But since then we’ve seen a steady fall, and the current FD interest rates have plateaued to 6.5% as of today. Once a lucrative investment option for risk-averse individuals, the returns don’t match up to what it used to be. It’s time to look out for a better investment alternative.
It’s time to bid goodbye to low returns of just 6% from fixed deposits!
Upgrade to fixed income investments with GoldenPi, India’s first online marketplace for investments in bonds and debentures. Held exclusively by Bond Trading Institutions, Banks, Corporates and other large financial institutions up until now, we’ve opened up the fixed income investment market to individual investors like you.
Here are some insights into the different types of Bonds in the Market:
Government Bonds
Government bonds are issued by the national government and are also known as ‘sovereign debt’. These types of bonds are considered to be the safest and a risk-free investment option. A risk-free investment option with no tax deduction at source, government bonds are a lucrative investment option for individuals with low-risk appetite, looking for stable returns.Municipal Bonds
Municipal Bonds are issued by local or state level governments or other agencies of the government like the transportation department, healthcare department in order to fund government activities. Like government bonds, municipal bonds are one of the safest investment options, as it is backed by the government’s ability to repay the amount invested.Public Sector Bonds
Public Sector Bonds are bonds issued by organizations within which the government holds more than 50% ownership. These bonds are usually medium to long-term bonds with maturity periods ranging from 5 years upwards. Some PSU bonds also come under the tax-free investment category. PSU bonds are implicitly guaranteed by the government, bringing in a greater sense of stability.Corporate Bonds
Large corporations and financial institutions take up a large portion of the corporate bond market. Depending on the maturity period, Corporate Bonds can be classified as short-term, intermediary or long-term which goes up to 12 years. The biggest difference between government bonds and corporate bonds is the higher yield rate. Corporate bonds don’t enjoy the stable status of the government and hence have a higher risk percentage. However, Corporate Bonds will provide a good rate of fixed returns. Most corporates with good credit ratings and reputation in the market are less likely to default, and hence investing in them will be a good bet for those who do their research and background check.High-yield Bonds
High –yield bonds are bonds issued by organizations that are new entrants in the market or those who haven’t built a strong reputation yet. These bonds have a lower credit rating than corporate bonds and offer a higher yield rate. For high-risk appetite investors, these bonds are opportunities that they leverage to make quick gains.
GoldenPi is India’s first online marketplace for bonds and debentures. If you’d like to start investing in bonds and debentures from the comfort of your home register here -
