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 bonds are exemted fro income tax and have attractive intrest rate. Since company 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 or period notified by the department from time to time
- 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.
- 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 Five years
- Bonds can not be pledged, sold transfer before completion of three or five 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 .
-
some on the issuers of 54EC Bonds are as follows:
| Bonds | Interest Rate % | Int Frequency | Term | Min Amt Rs |
|---|---|---|---|---|
| REC-54EC | 5.75% | Annually | 5 Yrs | 10000 |
| NHAI-54EC | 5.75% | Annually | 5 Yrs | 10000 |
A type of debt instrument that is generally 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 generally 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.
sovereign gold bonds are alternative way to invest in gold offered by Indian Government. They are safer,cheaper, and earn better net return then physical gold as they also earn intrest along with capital gain.
Sovereign Gold Bonds
For Indians, gold is more than a precious metal. In fact, the reverence for gold is beyond its market value for a common man. However, the making charges of gold can be quite high. Therefore, Government of India and RBI have come up with many alternatives like gold ETFs, gold bonds etc. Here, you can own gold in ‘certificate’ format. This article explores Sovereign Gold Bonds in detail.
The government of India lately introduced Sovereign Gold Bond Schemes to offer investors another way to own gold. Hence, it belongs to the debt fund category. It not only brought down the demand for real gold, but could also track import-export of the same. There is a transparency about this product as it comes under the purview of RBI. People who see gold more as an investment than an accessory (ornament), can opt for this. So, they need not waste money on making charges. Nor do they have to find ways (like hiring a bank locker) to store it safely. SGBs are government securities and hence safe. Their value is denominated in multiples of gold grams. This is why, it is a substitute for investing in physical gold. If you want to purchase a bond, just approach any agent, authorized by SEBI. After redeeming the bond, they will deposit the corpus (as per the current market value) to your registered bank account.
Who should invest in SGBs?
People who have a penchant for gold investments can consider sovereign gold bonds. As a low-risk investment, it is perfect for investors with low risk appetite. It also earns you a fixed income bi-annually. Therefore, if all these appeal to you, you can certainly consider buying an SGB. Compared to physical gold, the cost to purchase or sell SGBs are quite low. The expense of buying or selling the SGB is nominal in comparison to the physical gold. Those who do not want the hassle of keeping physical gold safe can also go for this. This is because it is easy to store this in demat form, and nobody can steal it as they are in paper form. So, if you are seeking a long-term investment avenue to make good returns, a gold bond can meet your needs.
Features of Sovereign Gold Bonds
a. Eligibility criteria
Any Indian resident – individuals, Trusts, HUFs, Charitable Institutions and universities – can invest in SGB. You may also invest on behalf of a minor.
b. Denomination/value
The value of the bonds is assessed in multiples of gram(s) of gold, wherein the basic unit is 1 gram. The minimum initial investment is 1 gram of gold, and the upper limit is 4 kgs of gold per investor (individual & HUF). For entities like trusts and universities, 20 kgs of gold is permissible.
c. Tenure
The bond’s maturity period is for 8 years. However, you can choose to exit the bond from 5th year onwards (only on interest payout dates).
d. Price & payment
You can pay online, by cash (only up to Rs. 20,000), DD or cheque. There will be a service charge deduction of Rs. 50 of those who pay online.
e. Interest rate
The current interest rate for SGB is 2.50% annually. They are paid twice a year on the nominal value. Returns are usually linked to the current market price of gold.
f. Issuance of bonds
Only Government of India Stocks (on RBI’s behalf) can issue gold bonds as per the GS Act, 2006. Investors will receive a Holding Certificate for it. You can also convert it to demat form.
g. KYC Documentation
You must follow the same Know-your-customer (KYC) norms when you buy physical gold. Hence, keep the KYC documents like copy of Driving License, PAN Card, Passport or Voter ID with you.
h. Tax treatment
There is no tax deducted at source on the proceeds from sovereign gold bond redemption. You can also claim indexation benefits along with long term capital gains when you decide to transfer the bond. So its tax implications are different from that of gold ETFs.
i. Eligibility for SLR
If banks have acquired bonds after going through the process of raising lien, hypothecation or pledging, they get counted towards SLR. The capital a commercial bank has to retain before giving credit to customers is called Statutory Liquidity Ratio.
j. Redemption price
The redemption price must be in INR, based on average of closing price of gold of 999 purity in 3 previous working days.
k. Sales channel
The government sells bonds through banks, Stock Holding Corporation of India Limited (SHCIL) and selected post offices as may be informed. The trading also occur via recognized stock exchanges (National Stock Exchange of India or Bombay Stock Exchange) directly or through intermediaries.
l. Commission
The receiving offices shall levy 1% of the overall subscription amount as commission for bond distribution of the bond. From this commission, they will share at least half with intermediaries (agents or brokers).
Advantages of Sovereign Gold Bonds
a. Absolute safety
Sovereign gold bonds carry none of the risks that is associated with physical gold, except the market risks. There is no hefty designing charge or TDS here. Therefore, nobody can steal it or change its ownership.
b. Extra income
You can earn guaranteed annual interest at the rate of 2.50% (on the issue price). This is the most recent fixed rate.
c. Indexation benefit
If you transfer your bond before maturity, you can get indexation benefits. There is also a sovereign guarantee on the redemption money as well as on the interest earned.
d. Tradability
You can trade the gold sovereign bonds on stock exchanges within a specific date (at the discretion of the issuer). For instance, after completing 5 years of investment, you can trade them on National Stock Exchange or Bombay Stock Exchange among others.
e. Collateral
Some banks accept SGB as collateral/security against secured loans. Hence, they will treat it as a gold loan after setting the loan-to-value (LTV) ratio to the value of gold. The India Bullion and Jewellers Association Limited determines this.
Saving Schemes
Salient features including Tax Rebate
- Account can be opened by cash only
- Minimum balance to be maintained in a non-Cheque facility account is INR 50/-
- Cheque facility available if an account is opened with INR 500/- and for this purpose minimum balance of INR 500/-in an account is to be maintained
- Cheque facility can be taken in an existing account also
- Interest earned is Tax Free up to INR 10,000/- per year from financial year 2012-13
- Nomination facility is available at the time of opening and also after opening of account
- Account can be transferred from one post office to another
- One account can be opened in one post office
- Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account
- Joint account can be opened by two or three adults
- At least one transaction of deposit or withdrawal in three financial years is necessary to keep the account active
- Single account can be converted into Joint and Vice Versa
- Minor after attaining majority has to apply for conversion of the account in his name
- Deposits and withdrawals can be done through any electronic mode in CBS Post offices.
- ATM facility is available
From 1.01.2018, interest rates are as follows:-
- 6.9% per annum (quarterly compounded)
- On maturity INR 10/- account fetches INR 717.43. Can be continued for another 5 years on year to year basis
- Account can be opened by cash / Cheque and in case of Cheque the date of deposit shall be date of presentation of Cheque
- Nomination facility is available at the time of opening and also after opening of account
- Account can be transferred from one post office to another
- Any number of accounts can be opened in any post office
- Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account
- Joint account can be opened by two adults
- Subsequent deposit can be made up to 15th day of next month if account is opened up to 15th of a calendar month and up to last working day of next month if account is opened between 16th day and last working day of a calendar month.
- If subsequent deposit is not made up to the prescribed day, a default fee is charged for each default, default fee @ 0.05 rs for every 5 rupee shall be charged. After 4 regular defaults, the account becomes discontinued and can be revived in two months but if the same is not revived within this period, no further deposit can be made.
- *If in any RD account, there is monthly default amount , the depositor has to first pay the defaulted monthly deposit with default fee and then pay the current month deposit. This will be applicable for both CBS and non CBS Post offices.
- There is rebate on advance deposit of at least 6 installments
- Single account can be converted into Joint and Vice Versa
- Minor after attaining majority has to apply for conversion of the account in his name
- One withdrawal up to 50% of the balance allowed after one year. It may be repaid in one lumpsum along with interest at the prescribed rate at any time during the currency of the account
Interest rates From 1.01.2018
| Period | Rate |
|---|---|
| 1yr.A/c | 6.6% |
| 2yr.A/c | 6.7% |
| 3yr.A/c | 6.9% |
| 5yr.A/c | 7.4% |
- Account may be opened by individual
- Account can be opened by cash /Cheque and in case of Cheque the date of realization of Cheque in Govt. account shall be date of opening of account
- Nomination facility is available at the time of opening and also after opening of account
- Account can be transferred from one post office to another
- Any number of accounts can be opened in any post office
- Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account
- Joint account can be opened by two adults.
- Single account can be converted into Joint and Vice Versa
- Minor after attaining majority has to apply for conversion of the account in his name
- *In CBS Post offices ,when any TD account is matured, the same TD account will be automatically renewed for the period for which the account was initially opened . Example 2 Years TD account will be automatically renewed for 2 Years. Interest rate applicable on the day of maturity will be applied
- The investment under 5 Years TD qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.
From 1.01.2018, interest rates are as follows:- 7.3% per annum payable monthly.
- In multiples of INR 1500/-
- Maximum investment limit is INR 4.5 lakh in single account and INR 9 lakh in joint account
- An individual can invest maximum INR 4.5 lakh in MIS (including his share in joint accounts)
- For calculation of share of an individual in joint account, each joint holder have equal share in each joint account.
- Account may be opened by individual.
- Account can be opened by cash/Cheque and in case of Cheque the date of realization of Cheque in Govt. account shall be date of opening of account.
- Nomination facility is available at the time of opening and also after opening of account.
- Account can be transferred from one post office to another.
- Any number of accounts can be opened in any post office subject to maximum investment limit by adding balance in all accounts.
- Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account.
- Joint account can be opened by two or three adults.
- All joint account holders have equal share in each joint account.
- Single account can be converted into Joint and Vice Versa.
- Minor after attaining majority has to apply for conversion of the account in his name.
- Maturity period is 5 years from 1.12.2011.
- Interest can be drawn through auto credit into savings account standing at same post office, through PDCs or ECS./In case of MIS accounts standing at CBS Post offices, monthly interest can be credited into savings account standing at any CBS Post offices.
- Can be prematurely en-cashed after one year but before 3 years at the discount of 2% of the deposit and after 3 years at the discount of 1% of the deposit. (Discount means deduction from the deposit.)
From 1.07.2017, interest rates are as follows:-
- 8.3% per annum, payable from the date of deposit of 31st March/30th Sept/31st December in the first instance & thereafter, interest shall be payable on 31st March, 30th June, 30th Sept and 31st December.
- An individual of the Age of 60 years or more may open the account.
- An individual of the age of 55 years or more but less than 60 years who has retired on superannuation or under VRS can also open account subject to the condition that the account is opened within one month of receipt of retirement benefits and amount should not exceed the amount of retirement benefits.
- Maturity period is 5 years.
- A depositor may operate more than one account in individual capacity or jointly with spouse (husband/wife).
- Account can be opened by cash for the amount below INR 1 lakh and for INR 1 Lakh and above by Cheque only.
- In case of Cheque, the date of realization of Cheque in Govt. account shall be date of opening of account.
- Nomination facility is available at the time of opening and also after opening of account.
- Account can be transferred from one post office to another
- Any number of accounts can be opened in any post office subject to maximum investment limit by adding balance in all accounts.
- Joint account can be opened with spouse only and first depositor in Joint account is the investor.
- Interest can be drawn through auto credit into savings account standing at same post office, through PDCs or Money Order.
- In case of SCSS accounts, quarterly interest shall be payable on 1st working day of April, July, October and January. It will be applicable at all CBS Post Offices.
- *Quarterly interest of SCSS accounts standing at CBS Post offices can be credited in any savings account standing at any other CBS post offices.
- Premature closure is allowed after one year on deduction of an amount equal to1.5% of the deposit & after 2 years 1% of the deposit.
- After maturity, the account can be extended for further three years within one year of the maturity by giving application in prescribed format. In such cases, account can be closed at any time after expiry of one year of extension without any deduction.
- TDS is deducted at source on interest if the interest amount is more than INR 10,000/- p.a.
From 1.01.2018, interest rates are as follows:-
- 7.6% per annum (compounded yearly).
- An individual can open account with INR 100/- but has to deposit minimum of INR 500/- in a financial year and maximum INR 1,50,000/-
- Joint account cannot be opened.
- Account can be opened by cash / Cheque and In case of Cheque, the date of realization of Cheque in Govt. account shall be date of opening of account.
- Nomination facility is available at the time of opening and also after opening of account. Account can be transferred from one post office to another.
- The subscriber can open another account in the name of minors but subject to maximum investment limit by adding balance in all accounts.
- Maturity period is 15 years but the same can be extended within one year of maturity for further 5 years and so on.
- Maturity value can be retained without extension and without further deposits also.
- Premature closure is not allowed before 15 years.
- Deposits qualify for deduction from income under Sec. 80C of IT Act.
- Interest is completely tax-free.
- Withdrawal is permissible every year from 7th financial year from the year of opening account.
- Loan facility available from 3rd financial year.
No attachment under court decree order.
| Scheme | Interest payable, Rates, Periodicity etc. | Minimum Amount for opening of account and maximum balance that can be retained | Salient features including Tax Rebate |
|---|---|---|---|
| National Savings Certificates (NSC) 5 Years National Savings Certificate (VIII Issue) |
|
Minimum of Rs. 100/- and in multiples of Rs. 100/- No Maximum Limit |
*In case of NSC VIII , transfer of certificates from one person to another can be done only once from date of issue to date of maturity. *At the time of transfer of Certificates from one person to another, old certificates will not be discharged. Name of old holder shall be rounded and name of new holder shall be written on the old certificate and on the purchase application(in case of non CBS Post offices) under dated signatures of the authorized Postmaster along with his designation stamp and date stamp of Post office. |
- 7.3% compounded annually
- Amount Invested doubles in 118 months (9 years & 10 months)
Minimum Amount for opening of account and maximum balance that can be retained: Minimum of Rs. 1000/- and in multiples of Rs. 1000/- No Maximum Limit.
- Certificate can be purchased by an adult for himself or on behalf of a minor or by two adults.
- KVP can be purchased from any Departmental Post office.
- Facility of nomination is available.
- Certificate can be transferred from one person to another and from one post office to another.
- Certificate can be en cash after 2 & 1/2 years from the date of issue.
- A legal Guardian/Natural Guardian can open account in the name of Girl Child.
- A guardian can open only one account in the name of one girl child and maximum two accounts in the name of two different Girl children.
- Account can be opened up to age of 10 years only from the date of birth. For initial operations of Scheme, one year grace has been given. With the grace, Girl child who is born between 2.12.2003 &1.12.2004 can open account up to1.12.2015.
- If minimum Rs 1000/- is not deposited in a financial year, account will become discontinued and can be revived with a penalty of Rs 50/- per year with minimum amount required for deposit for that year.
- Partial withdrawal, maximum up to 50% of balance standing at the end of the preceding financial year can be taken after Account holder’s attaining age of 18 years.
- Account can be closed after completion of 21 years.
- Normal Premature closure will be allowed after completion of 18 years/provided that girl is married.