Even if you keep money for 5 years in a bank deposit ie Fixed Deposit (FD), at this time you will be offered interest rate up to 5.5% only in big banks. Secondly, your returns will be taxed. Now if you are in the highest tax bracket, then your returns will be very less. Therefore, instead of FD, you should look for another investment option. One of the debt investment options is non-convertible debentures ie NCDs. In these you can get much more interest than FD. We will give information about the three best NCDs here.
Where to buy NCDs and how safe are they?
NCDs can be purchased from share exchanges and if you buy them at the right prices, you can definitely earn a higher return than FD. As far as safety is concerned, NCDs can be both safe and unsafe. Most of the previously released NCDs have been safe. Know further the details of NCDs with AAA or AA rating, in which you will also get more interest than FD.
These are the best NCDs
NCDs also have a maturity. Maturity You get money with interest. Currently, Britannia’s debentures are getting 8 per cent interest. The debentures of Britannia will mature on 1 August 2022. Similarly, 9.50% interest will be available on Shriram Transport N2 debentures. These debentures will mature on 1 February 2023. Finally, let us know that 9.57% interest is being given on Edelweiss Housing N5 Debentures. These debentures will mature on 1 July 2026.
Know how much will be the return on investment
Let us understand this with an example. Suppose you buy an NCD with a face value of 1000 rupees for Sri Ram Transport NCDs for Rs 1050. If you spend 1 lakh rupees, you will get 95 NCDs. On these 95 NCDs, the interest accrued every year will be Rs 8883, which will bring your yield (return) to around 8.88%. The return is low because you have to buy at the current rate instead of the NCD face value.
How much will be the real return
One more thing, when you sell it in February 2023, you will not only get Rs 1050 instead of Rs 1000 for each NCD. This is a loss. But even in that case your returns will be 6-7%, which is more than FD. If you research all the listed NCDs, then you can get NCD with good yield out of many of them. The main thing is that you have to choose the NCD at the right price. If you get the NCD at the right price, then you will make a lot of profit.
Buy and sell from stock exchange
NCDs are listed on stock exchanges and hence they can be bought and sold from there. Initially, you buy NCDs in small quantities, as they are not very liquid. That is, it is not easy to sell them immediately. Another thing is that by purchasing them, you keep them till maturity. The interest on NCDs is fully taxable. However no TDS is deducted on NCDs. This means that you will have to add the interest income to your annual total income and file the return accordingly.
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