Non-Convertible
Debentures (NCD)

Both are corporate debt instruments, but NCDs have important advantages over corporate FDs: (1) NCDs are the regulatory authority-regulated with mandatory prospectus, credit rating, and debenture trustee appointment — corporate FDs have minimal regulatory oversight; (2) NCDs are listed on NSE/BSE — corporate FDs have no exchange listing or secondary market; (3) NCDs have mandatory credit ratings from accredited agencies — corporate FDs may be unrated; (4) NCDs can be secured with specific assets charged — corporate FDs are always unsecured. The main advantage of corporate FDs is simplicity and sometimes slightly higher yield — but the regulatory and security advantages of NCDs are substantial.

NCD interest income is taxed as "Income from Other Sources" at your applicable income tax slab rate — exactly like FD interest. For investors in the 30% slab, effective post-tax yield on a 9% NCD is approximately 6.3%. TDS may apply if NCDs are held in physical (non-Demat) form — Demat-held NCDs generally do not attract TDS at source (but you must self-report and pay tax). If you sell NCDs in the secondary market before maturity: gains held for more than 12 months are Long-Term Capital Gains (LTCG) taxed at 12.5% above the ₹1.25L threshold; held under 12 months are STCG at your slab rate. Please consult a CA for personalised guidance.

For public NCD issues, the minimum investment is typically ₹10,000 (one bond of ₹1,000 face value × 10 bonds, or similar structures). You can subscribe to multiple lots in multiples of the minimum. For secondary market purchases, you can buy as little as 1 bond (₹1,000 face value), though practically, minimum trade sizes on the exchange vary. For portfolio diversification purposes, we generally recommend a minimum NCD investment of ₹1–2 lakh per issue — allowing meaningful position sizing without excessive concentration in small lots.

Yes — NCDs are listed on NSE and BSE, so you can sell in the secondary market before maturity. However, the secondary market for most NCDs has very low trading volumes — you may not be able to sell at a fair price, particularly for smaller or less well-known issuers. The sale price in the secondary market will reflect current interest rates — if rates have risen since you bought the NCD, you may receive less than the face value. We strongly advise treating NCD investments as hold-to-maturity instruments and investing only funds you genuinely do not need before the NCD's maturity date.

The yield-to-maturity (YTM) is identical for monthly and cumulative NCDs from the same issuer — the difference is purely the timing of cash flows. Monthly payout NCDs are ideal for: retirees, investors needing regular income to meet living expenses, or those who want to reinvest the monthly interest into SIPs or other instruments. Cumulative NCDs are ideal for: wealth accumulators who don't need current income and want a clean, single maturity value. Note: Interest on cumulative NCDs is still taxed annually on accrual basis under Income Tax Act even though you don't physically receive it until maturity — ensure you account for this tax outflow.