What's the difference between NCDs & FDs?
Following are the differences between an NCD and an FD:
i) Liquidity: In contrast to a NCD, FD can't be sold in the market. As NCDs are listed on a stock exchange, you can sell them any time you want. However, bank FDs are also highly liquid and can be encashed before maturity with minor penal charges.
ii) Safety: While NCDs are secured debt, corporate FDs are altogether unsecured and bank FDs are secured to the extent of Rs one lakh only.
iii) Taxation: There is difference in taxation aspect also. In addition to interest income, there can be capital gains if you sell the NCD before maturity. However, unlike FDs, there is no TDS in case of NCDs.
iv) Interest rate risk: Unlike FDs, NCDs carry interest rate risk due to changes in market interest rates.