- Date : 23/06/2023
- Read: 2 mins
NCDs are high-yielding fixed-income instruments that offer a reliable alternative to traditional deposits, providing regular income with moderate risk.
- NCDs offer high returns in the current interest rate environment.
- Choose NCDs with higher ratings, yield-to-maturity, and liquidity.
- Indiabulls Commercial Credit among them with a coupon rate of 8.84% and a YTM of 10.64%.
- Interest income from NCDs is taxed based on slab rates.
Investors searching for regular income with a medium-risk appetite often seek alternatives to traditional fixed deposits. Corporate non-convertible debentures (NCDs) have emerged as a profitable alternative, offering potentially higher yields.
These fixed-income securities are issued by companies through public offerings while carrying a specific tenure and paying periodic interest or maturity amounts. With their listing on exchanges and liquidity before maturity, NCDs have gained popularity, especially in the current uncertain interest rate environment. Nevertheless, considering credit ratings to mitigate credit risk is prudent.
List of 9 High-Rated NCDs
1. Indiabulls Commercial Credit
2. India Infoline Finance
3. Shriram Transport Finance Co
4. JM Financial Credit Solutions
5. M&M Financial Services
6. Tata Capital Housing Finance
7. Tata Capital Financial Services
8. Tata Capital Financial Services
9. NTPC
Also Read - A beginner’s guide to investing in non-convertible debentures
What are tax considerations?
Interest income from NCDs is taxed based on individual slab rates. Listed NCDs held for over 12 months are considered long-term capital assets, while unlisted NCDs require a holding period of 36 months. Long-term capital gains from listed NCDs are taxed at a flat rate of 10% without indexation, while short-term gains follow the investor's slab rate. Capital gains taxation remains consistent, whether NCDs are sold before maturity or redeemed at maturity. Selling NCDs before maturity includes accrued interest, while redemption at maturity is at face value. This could lower tax liability for investors in higher tax brackets.
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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
