Bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) to use and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals (ex semi annual, annual, sometimes monthly).
Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Bonds and stocks are both securities, but the major difference between the two is that (capital) stockholders have an equity stake in the company (i.e., they are owners), whereas bondholders have a creditor stake in the company (i.e., they are lenders). Another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely.
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Jitendra P.S.Solanki, Investment Adviser & CFP
Last Traded on : 04 Sep 16:01
|COMPANY NAME||NSE SERIES||LAST PRICE||CHANGE(%)||OPEN||HIGH||LOW||FACE VALUE|
|Housing and Urban Development Corporation||N7||1,015.00||4.84%||990.00||1,015.00||990.00||1000|
|Housing and Urban Development Corporation||N5||1,054.00||0.09%||1,054.00||1,054.00||1,054.00||1000|
|Housing and Urban Development Corporation||N3||1,083.00||-0.46%||1,084.00||1,087.80||1,083.00||1000|
|Housing and Urban Development Corporation||N2||1,113.57||-0.13%||1,100.80||1,114.99||1,100.80||1000|
|India Infoline Finance||N8||1,020.11||-0.02%||1,023.78||1,023.78||1,018.00||1000|
|India Infoline Finance||N9||1,062.75||0.07%||1,042.60||1,062.75||1,042.60||1000|
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Capital Gains Bonds are instruments which offer tax exemption for transferring gains of long term capital assets. The Investment in these Bonds is to be made within six months from the date of such transfer of capital assets (Land/House Property etc.) for being exempted from Capital Gains Tax under Section 54EC of the Income Tax Act, 1961.
The eligible bond under Section 54 EC are:
|Tax Benefit||SEC 54 EC||SEC 54 EC|
|Tenure||3 Years||3 Years|
|Mode of Interest||Annual||Annual|
As per provisions of Income Tax Act, 1961, any long term capital gains arising from transfer of any capital asset would be exempt from tax under section 54EC of the Act if:
The entire capital gain realized is invested within 6 months of the date of transfer in eligible bond.
Such investment is held for 3 years
To avail of capital gain exemption, the bonds so acquired cannot be transferred or converted into money or any loan or advance can be taken on security of such bond within 3 years from date of acquisition else, the benefit would be withdrawn
If the amount invested in bonds is less than the capital gains realized, only proportionate capital gains would be exempt from tax.
Bonds may be held by: An individual, NRI, HUF, Charitable institution or University.
There is no maximum limit for investment. Bonds are issued at a minimum amount of Rs. 1000/- (face value) and in multiples thereof.
Interest on bonds will be taxable under IT Act, 1961. The bonds will be exempt from wealth tax under the Wealth Tax Act, 1957.
Subscription to the Bonds is in the form of Cash/Drafts/Cheques.
Bonds will be issued only in the form of Bonds Ledger Account and may be held at the credit of the holder in an account called Bonds Ledger Account (BLA).
Applications for the Bonds in the form of Bonds Ledger Account will be received at :
1) Any number of Branches of State Bank of India, Associate Banks, Nationalised Banks, four private sector banks and SCHIL as specified in the TB 3.
2) Any other bank or number of branches of the banks and SCHIL where the applications will be received as specified by the Reserve Bank of India in this behalf from time to time.
No nomination shall be made in respect of the Bonds issued in the name of a minor.
1) Every nomination and every cancellation or variation shall be registered at the Receiving Office where the Bonds is issued and shall be effective from the date of such registration.
2) If the nominee is a minor, the holder of a Bonds may appoint any person to receive the Bonds/amount due in the event of his death during the minority of the nominee.
The Bonds in the form of Bonds Ledger Account shall not be transferable.
The Bonds will bear interest at the rate of 8% per annum. Interest on non-cumulative bonds will be payable at half-yearly intervals from the date of issue or interest on cumulative Bonds will be compounded with half-yearly rests and will be payable on maturity alongwith the principal, as the subscriber may choose.
Tax will be deducted at source while making payment of interest on the non-cumulative bonds from time to time and credited to Government Account. Tax on the interest portion of the maturity value will be deducted at source at the time of payment of the maturity proceeds on the cumulative Bonds and credited to Government Account.
The Bonds shall not be tradable in the secondary market and shall not be eligible as collateral for loans from banks, financial Institutions and Non Banking Financial Company (NBFC) etc.
The Bonds shall be repayable on the expiration of 6(six) years from the date of issue.
Brokerage at the rate of Re1.00 (Rupee one only) per Rs.100 will be paid to the brokers including PPF and UTI agents registered with the Receiving Office and also to authorized banks on the applications tendered by them on behalf of their clients and bearing their stamp.
Tax Free Bonds are instruments where interest earned is not taxed. However, there is no deduction for the principal invested in these bonds.
These bonds will be eventually listed on the Bombay and National Stock Exchange, so investors will have the option of selling them before the full term of the bond. However, the price you may get for selling before they mature will depend on market conditions. Experts say these bonds make sense only for very risk-averse investors with a lot of cash at hand (say upward of Rs 100,000).
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