How to buy tax free bonds in India and see bond rating
There are many text free bonds available in the market. There are two type bond one is corporate bonds another is government bonds. Bonds are like fixed deposits which give promise to repay the amount with interest after maturity.
How to buy corporate bonds?
When company will issue bonds, they will declare their term and condition. So before buying bond you will know their interest rate, tenure of bond and other term. To buy this bond you have to fill out an application form and submit it to issuing company’s branch. Along with application you have to submit application fee and other documents like PAN card, address proof, Identity proof. If you want to keep your bond on demat account, you will fill out details of demat information. Otherwise you can receive your bond in physical format.
How to buy government bonds?
When government issues bond, you will have to fill out application form for the bond and submit it to designated branches of banks and post offices or official distributors. You will a certificate after processing your application
Are there any risks on Bonds?
I do not tell you there is no risk in the bond. Company may fails to return your predetermine interest. If bond issuing company face financial crisis, then there is risk to get your money that may be interest or interest plus capital. So when you want invest a company bond, you have to research about company and see their ratting in the market. Beware never invest to company who promise high return. Government bonds are more secure than corporate bonds. Bonds from famous and high rating corporate house are more believable.
How to see bond rating?
There are many rating agencies who give rating of companies looking their internal and external factor like strength of the balance sheet, profitability, revenue sources, growth potential, government intervention, industry outlook, competition etc.
Rating scale given bellow
Highest safety rating is AAA
High safety rating is AA
Adequate safety rating is – A
Moderate credit risk rating is BBB
Moderate default risk rating is – BB
High default risk rating is B
Very high default risk rating is C
Default rating is D