Corporate Bonds Compare

Additional Useful Information

• When an investor purchases a corporate bond, the issuing company is bound by a legal contract wherein they are obligated to make interest payments as per the coupon rate to the investor.

• Every Corporate Bond is assigned a credit rating by a credit rating agency. Higher credit ratings mean that the safety of the investment is higher, and therefore risks involved are lower. However, lower credit means that the risks of investing in such bonds are higher.

• Investing in Corporate Bonds is suitable for investors who desire regular passive income.

• The prices of Corporate Bonds keep changing with a changing economic environment and government policies.

Returns *

• Corporate Bonds do not guarantee any returns. However, the probability of negative returns are medium.

• Typically, Corporate Bonds can generate returns ranging from 6% to 12% per year depending on the duration for which they are held and their credit ratings.

• Corporate Bonds usually provide higher returns as compared to government bonds and bank fixed deposits. (moved from top to bottom)

Risk Level

• Corporate Bonds are considered medium risk investments. They are riskier as compared to government bonds and fixed deposits.

• Corporate Bonds have a credit risk associated with them. This means that if the company issuing these bonds default in their commitments, the investor can make losses on the investment.

• Corporate Bonds become riskier during times of economic downturn. This is because the chance of the issuing company defaulting on the interest payments are higher in these times.

• All bonds are subject to interest rate risk.

Liquidity

• Corporate Bonds are moderately liquid.

• They can be sold at any given time prior to maturity. However, it is possible that there may not be a buyer for the bond. There is no guarantee that the bond will be sold.  In this event, the investor continues to hold the bonds till maturity and earn the interest till maturity.

Interesting Facts

• The highest quality bonds on credit rating scales are commonly rated as "Triple A (AAA)” bonds. They are called investment grade bonds. Bonds up to a credit rating of “double B(BB)” are considered investment grade.

• The lowest quality bonds are rated as "Junk (BB and below)" bonds. They are also called non-investment grade bonds.

• Lower rated debt instruments offer higher yields than higher rated instruments, but higher yields come with higher credit risks.

Tax Implications

• Earnings received from Corporate Bonds are taxable.

• Interest earned by investors from Corporate Bonds are to be added to their total taxable income and taxes are required to be paid as per the income tax slab.

• When investors sell Corporate Bonds prior to maturity, the difference between the Sale Amount and Purchase Amount is typically called “Capital Gain” or “Capital Loss” (if sale amount is lesser than the purchase amount).

• The tax that the investor must pay on Capital Gain is –
• Situation 1 – If the Corporate Bonds are sold within a period of 2 years from investment, the Capital Gains earned (called Short Term Capital Gains) are to be added to the taxable income of the investor and taxes are required to be paid based on the applicable income slab.
• Situation 2 - If the Corporate Bonds are sold after a period of 2 years from investment, the Capital Gains earned (called Long Term Capital Gains) are to be taxed at the rate of 12.5%.

• There is no tax in case of “Capital Loss”.

Where To Invest

• GoldenPi: Buy Bonds, Debentures & Other Fixed Income Assets

• Invest in Bonds Online - Best Bonds & Debentures Investment Platform | IndiaBonds