Call Us

FOR EXISTING POLICY

Have query on premium, payout or any servicing need?

Call us:

1 860 266 9966

Monday - Saturday | 10 am - 7 pm IST

Call charges apply

Dedicated NRI Helpdesk:

+91 22 6251 9966

Monday - Saturday | 10 am - 7 pm IST

Call charges apply

FOR NEW POLICY

Want to buy a new policy online?

Call us:

+91 22 6984 9300

Give missed call for a call back:

+91 11 6615 8748

Monday - Sunday | 8 am - 11 pm IST


Exclusively for NRIs:

Call us:

Give missed call for a call back:

+91 11 4473 0242

Available All Days | 24 x 7

Language

Back Arrow Icon
Close Button
Back Arrow Icon
Close Button

Need assistance in choosing the right insurance plan? Get a call from our Expert.

Need assistance in choosing the right insurance plan?Get a call from our Expert.

+91 dropdown arrow

Select Plan dropdown arrow
  • Term plans
  • Saving plans
  • Wealth plans
  • Retirement plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in. T&C apply.

What are Bonds: Types of Bonds and How to Invest in Them?

19-07-2022 |

Bonds are financial instruments that ensure safe returns on your hard-earned money. Conservative investors choose to invest in bonds for a long-term benefit. There are different types of bonds in India. You can compare the bond features and choose the ideal option to suit your financial needs. Therefore, it is important to understand what a bond means, how it is different from other financial instruments, and the types to make a well-informed decision. So, here is a detail to help you best in this regard.

 

What is a Bond?

A bond is a financial debt instrument in which the issuer company or the Government will borrow funds from you and pay an interest amount called the coupon. You are called the bondholder and will have a creditor stake in the company, unlike the equity stake in the case of stock investment.

The issuer company and the bondholder will get into a formal agreement, wherein the issuer will oblige to repay the borrowed money with the applicable interest as a lump sum or in regular intervals such as monthly, semi-annually, or annually.

Investing in fixed income bonds is less risky compared to other options available in India. The Government and the other companies borrow funds through bonds to engage in long-term investments or manage their current expenditure.



Types of Bonds



Different types of bonds are available in India based on their issuance, tenure, and flexibility. Bond prices and interest rates will vary depending on the country’s financial stability.

  • G-Sec Bonds - G-Sec bonds are called Government Security Bonds issued by the Central or State Government. It is one of the most commonly purchased debt instruments in India. They are issued at a fixed interest rate, and the bond tenure can range between 5 to 40 years.

    The Government issues such bonds to engage in infrastructure development projects, pay for current expenditures or other expenses, and help small investors earn interest at a lower risk.

  • Corporate Bonds - Corporate bonds are bonds issued by companies to borrow the required funds from the investors for a fixed period. The company will provide a specific interest through the bond tenure. Companies engage in such investments to raise capital for business growth.

    It is a preferred type of investment for people looking to earn a fixed interest rate through the policy tenure securely. The investor will receive the face value and interest earned when the policy matures.

  • Convertible Bonds - A convertible bond offers the benefit of debt and equity. However, at any given time, you can avail of either the debt or equity benefit and not both at the same time. You can convert the bond to a definite number of stocks and become shareholders of the company.

  • Zero-coupon - As the name suggests, zero-coupon bonds do not provide an interest. However, it is traded at a  decent discount giving a reasonable profit when the bond matures. It is an ideal investment for people who want to park their funds safely for a fixed tenure. Treasury bills issued by the Government are an example of a zero-coupon bond that has a maturity of less than one year.

  • Inflation-linked Bonds - They are primarily issued by the Government and protect against the inflation risk. Therefore, the principal amount and the corresponding interest rate rise fluctuate within the inflation rate.

  • Sovereign-gold Bonds - Sovereign gold bonds are issued by the Central Government. They are issued to people who want to invest in gold but do not want to keep it in its physical form. It is a secure form of investment, and the interest earned is exempt from tax* consideration. These tax* free bonds can have a maturity period of 8 years, and the investors can redeem them anytime after five years of investment.

  • The floating rate saving bonds (RBI Bonds) - These bonds are issued by the RBI and can have a tenure of 7 years. The interest rates keep fluctuating throughout the bond tenure. The interest rate gets adjusted every six months. Therefore, the investors pay the interest semi-annually and not when the bond matures.

  • As the interest rates are not fixed, it is based on the economic conditions prevailing in the country. The bond becomes repayable at the end of the bond tenure. Premature redemption applies to a specified category of people, such as senior citizens. And it is important to mention here that the interest earned is taxable based on the income tax* slab rate.

For investing in government bonds, you might need a Demat account. You can either avail it from a bank or a stockbroker. When you have the Demat account and the bank account active, you can invest in bonds online through the stockbroker or at the exchange directly. You can also avail of it through your bank or a post office by visiting the nearest branch in person. The Government also launched the RBI Retail Direct Gilt Account. It is a platform that allows investors to buy and sell government securities directly.

And corporate bonds can be availed of through the official website of the company or at their nearest branch office based on their bond terms and conditions.

While investing in bonds can be secure and a preferred form of investment, you can also consider investing in life insurance plans for securing your family's financial future. Insurance providers have introduced comprehensive savings insurance plans that can provide a life cover and a savings benefit. In addition, the savings plan will have flexible features that help you customise it according to your financial needs.

For instance, our Tata AIA savings policy provides flexible premium payment and payout options that help you pay the premium monthly, semi-annually, or annually and receive the payout benefit as a lump sum or regular income. Therefore, when you buy a savings plan, compare different solutions based on the comprehensive and flexible benefits to ensure maximum benefits.



Conclusion

Investing in bonds helps you secure your earnings over the long term. In addition, it can earn you reasonable returns based on the type of bond. However, there are different types of bonds based on the tenure, type of issuer, and the terms and conditions related to the interest amount. Therefore, research the varied types of bonds and choose the best option to suit your individual financial needs. Finally, and most importantly, stay invested through the bond tenure to receive the benefits as desired!

L&C/Advt/2022/Jul/1546

Get complete protection at affordable cost & tax benefits

+91 dropdown arrow
  • +93 Afghanistan

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.


 

Looking to buy a new insurance plan?

Our experts are happy to help you!

+91

Select plan
  • Term plans
  • Saving plans
  • Retirement plans
  • Wealth plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in

People Like You Also Read

Difference Between Close Ended & Open Ended Mutual Fund | Tata AIA
Read More
Index Funds vs. Mutual Funds: What is the Difference?
Read More
How to Choose the Right Payout For Your Term Policy?
Read More
5 Smart Investment Options That Can Give You A Monthly Income | Tata AIA Blog
Read More
ELSS vs ULIP: Understanding the Key Differences | Tata AIA Blogs
Read More
Difference Between Recurring Deposit & Fixed Deposit | Tata AIA Blogs
Read More
What is KYC? The Only Guide You Need | Tata AIA Blogs
Read More
NFO vs IPO: Understanding the Key Differences | Tata AIA Blogs
Read More
How To Invest In NFO? | Tata AIA
Read More
Top 5 Questions Asked About NFO | Tata AIA
Read More

People Like You Also Read

Difference Between Close Ended & Open Ended Mutual Fund | Tata AIA
Read More
Index Funds vs. Mutual Funds: What is the Difference?
Read More
How to Choose the Right Payout For Your Term Policy?
Read More
5 Smart Investment Options That Can Give You A Monthly Income | Tata AIA Blog
Read More
ELSS vs ULIP: Understanding the Key Differences | Tata AIA Blogs
Read More
Difference Between Recurring Deposit & Fixed Deposit | Tata AIA Blogs
Read More
What is KYC? The Only Guide You Need | Tata AIA Blogs
Read More
NFO vs IPO: Understanding the Key Differences | Tata AIA Blogs
Read More
How To Invest In NFO? | Tata AIA
Read More
Top 5 Questions Asked About NFO | Tata AIA
Read More
Website Logo Image Icon

Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance