Frequently Asked Questions
Why Invest in Fixed Income Securities
While many investments provide some form of income, bonds tend to offer the highest and most reliable cash streams. Most important, a diversified bond portfolio can provide decent yields with a lower level of volatility than equities or any other asset class, and with higher income than traditional bank instruments like FDs.
Advantages of Investing in Bonds:
- Stability of Principal
One advantage of investing in fixed-income securities is peace of mind that comes from a capital preservation. Investors benefit by investing in fixed income securities as they preserve and increase their invested capital.
- Generates a Steady and Regular Income Stream
In addition to the benefit of capital appreciation, fixed-income securities provide investors with a steady stream of income. For example, by Investing Rs. 1,00,000 / - in bond with 12% annual coupon rate, investor has assurance to get Rs. 12,000 directly in bank account on yearly basis till the maturity of the bond.
- High Priority Claim to Assets
Fixed-income investors also benefit from their position in the capital structure of an entity issuing both equity and debt investments. Investors in bonds of a corporation have a higher priority over common and preferred stockholders of the same entity (issuer).
- Nullify Market Volatilities
The prices of Debt securities display a very lower average volatility as compared to the prices of equity or mutual fund and ensure the greater safety of accompanying investments.
- Zero Credit Risk
Investors can even neutralize the default risk on their investments by investing in Govt. securities, which are normally referred to as risk-free investments due to the sovereign guarantee on these instruments.
- Efficient Portfolio Diversification
Fixed Income securities enable wide-based and efficient portfolio diversification and thus assist in portfolio risk-mitigation.
What is bond?
A bond is a fixed income instrument that represents a loan made by an investor (bond holder) to a borrower (bond issuer). Governments, corporations, banks and municipalities issue bonds when they need capital. An investor who buys a government bond is lending the government money. If an investor buys a corporate bond, the investor is lending the corporation money.
What is maturity date?
Like a loan, a bond pays interest periodically and repays the principal at a stated time, known as maturity.
What is difference between Yield to Maturity (YTM) and Current Yield (CY)?
Yield to maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures. In other words, it is the internal rate of return (IRR) of an investment in a bond if the investor holds the bond until maturity, with all payments made as scheduled and reinvested at the same rate.
Yield to call (YTC) or Yield to put (YTP) is calculated the same way as yield to maturity, but assumes that debt instrument will be called (by issuer in case of call and by investor in case of put) and the investor will receive face value back at the call or put date. In case of bonds with Call or Put option, yield is calculated upto call (Yield to call) or put date (Yield to put).
While, Current Yield (CY) is an investment's annual income (coupon) divided by the current price of the security.
What is the difference between Coupon Rate and Yield?
Coupon is the annual interest rate paid to bondholders, while yield is a measure of return based on coupon and purchase/investment price.
What is call / put options?
A bond option is a contract that gives an investor or issuer the right to buy or sell a bond by a particular date for a predetermined price.
Call option - allows the issuer to buy back the bond at a predetermined price at a certain time (call date) in future. The holder of such a bond has, in effect, sold a call option to the issuer.
Put option - allows the holder to demand early redemption at a predetermined price at a certain time (put date) in future. The holder has the right to seek redemption from the issuer, prior to the maturity date
What does Perpetual Bond mean?
Perpetual bond is a bond with no fixed maturity date. Typically, these bonds are issued with call date and callable at the predefined call date. (Yield of perpetual bonds are therefore calculated upto earliest call date).
Which types of instruments are available for investment?
Taxable bonds/NCDs issued by PSUs, Banks, Corporates, NBFCs, Municipal Corporations and Financial Institutions
- Government Guaranteed Bonds
- Tax-free bonds
- Government Bonds
- State Development Loans (SDL)
- Treasury bills (T-bills)
- Perpetual Bonds
- Fixed Deposits (FDs) of various corporates, PSUs and NBFCs
- High yielding bonds
- Zero Coupon/ Deep Discount Bonds
- India Savings Bonds
- Capital Gain Tax Bonds (54 EC)
What are the issuers in debt market?
The current issuers in the bond markets are:
- Central & State Government (through RBI)
- Public Sector Undertaking (PSUs)
- Financial Institutions
- Municipal Corporations
Who regulates Bond Markets?
Bond Market is regulated by RBI & SEBI.
Where are these bonds traded?
Bonds are typically traded over OTC market (phone-based voice market).
What is Face Value of Bond?
Face value is the amount the investor will get back from the issuer once the debt instrument matures.
Are these bonds secured?
Bonds can be issued as secured or unsecured in nature. Please click on the ‘view detail’ tab of bond to get information on nature of security of the bond.
Are these bonds guaranteed?
Not all bonds carry specific guarantee. However, there are some bonds which are issued with guaranteed by either parent company or government or government owned companies.
How the bonds are issued?
The bond issuance process:
- Bond issuance process varies based on bond type.
- Corporate bonds are issued through private placement or through public issues.
- Government bonds are issued through RBI auction mechanism.
Are these bonds listed?
Most bonds are listed on stock exchanges (BSE/NSE). Gsec / SDLs are issued by Government and thus considered as deemed listed bonds, and does not require any specific listing unlike bonds issued by corporate entities.
What is day count convention?
Day count convention is to determine the number of days between two coupon dates. Each product follows different day count convention to determine number of days between coupon dates.
Like corporate bonds follows actual/actual day count wherein actual number of days between coupon dates are calculated.
While in case of Gsec 30/360-day count convention is followed, where in days in every month (irrespective of 31 days or 28 days) is considered as 30 days.
What is accrued interest? (What is holding period interest?)
Accrued interest is the interest on bond that has accumulated since the investment or since the previous coupon payment. In simple terms, accrued interest is holding period interest which seller of the bond take from buyer of the bond.
Accrued interest = (Days between settlement date and last interest payment date) * (Coupon Rate /100) * (Number of bonds * Face value of bond)
How will I get interest on bonds?
In case of Corporate and Government Bonds, interest will be credited in the bank account linked with demat directly by issuer on interest payment dates.
How is bond price determined?
The price of a bond is determined by discounting the expected cash flow to the present using a discount rate. Four primary influences on bond pricing on the open market are supply and demand, age-to-maturity, credit ratings and economic factors.
Are these bonds rated?
Yes, Bonds and Corporate FDs are rated by SEBI regulated rating agencies like CRISIL, ICRA, CARE, India Ratings.
What does a different rating imply? (Rating Scale)
AAA Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
AA Instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
A Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.
BBB Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
BB Instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations.
B Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
C Instruments with this rating are considered to have very high risk of default regarding timely servicing of financial obligations.
D Default Instruments with this rating are in default or are expected to be in default soon.
Note: The modifiers + (plus) or – (minus) may be appended to the rating symbols to indicate their relative position within the rating categories concerned. Thus, the rating of AA+ is one notch higher than AA, while AA- is one notch lower than AA. (Source: Rating Agencies)
What is the registration process?
One can register with Tipsons using (https://www.thefixedincome.com/) and by verifying mobile number and email id.
Can I apply for Bonds in Joint name?
Yes, if you have a demat account in joint name, you can purchase bonds in joint name.
Can NRIs invest in bonds?
Yes, NRIs can invest in NCDs provided the company issuing NCDs allows them to invest in it.
How will I get my Interest on the Due date?
The interest shall be credited to the respective Bank account registered with the demat account through ECS on the due date for interest payment.
How’s the return on Bonds taxed for Resident Individuals?
There are two ways through which bonds are taxed for Resident Individuals:
- Interest Income: The tax treatment of interest income from bonds, except tax free bonds, is similar to any other interest income such as interest income from FDs. In other words, interest income from NCDs will be subjected to tax at normal rates by including it in 'Income from other sources'. Interest income generated from tax free bonds are not taxed.
- Capital Gain:
For listed bonds, if sold within a period of 12 months from the date of allotment/Purchase date, short term capital gains / loss (STCG) will arise and if you decide to sell Bonds after a period of 12 months, the resulting gain or loss is called long term capital gains / loss (LTCG).
While short term capital gains on sale of NCDs would be taxed at normal rates, long term capital gains on sale of NCD (a listed security) are taxed at concessional rates u/s 112 of IT Act.
Is the KYC (Know Your Client) process compulsory?
Yes, KYC is a regulatory requirement and thus, mandatory.
What is the KYC registration process?
Once you are registered, you can start the KYC process by uploading your documents on The Fixed Investment website. Post verifying the same, we will update the KYC status as KYC compliant.
Following documents are required for KYC;
- Passport Photo
- Copy of PAN
- Copy of Address Proof
- Copy of Cancelled Cheque
- Copy of Demat Statement/Client Master
What is the minimum investment amount?
Minimum investment amount ranges between Rs. 10,000 to Rs. 10,00,000 depending on product type and underlying bonds.
Can I use my existing demat account for bond transactions as well? What if I don’t have a demat account?
You can use your existing demat account for investing in bonds. If you don’t have a demat account, then we will help you to open a demat account (https://demat.tipsons.com/).
Do I get any trade confirmation from Tipsons?
Yes, you will get trade wise deal confirmation from Tipsons.
Do I have to give my funds to Tipsons for investment?
Depending on the product, you will have to transfer funds either to BSE/NSE or direct issuer.
In case of corporate bond trades, investors have an option to choose between BSE & NSE to transfer funds and settle bond transactions. While in case of fixed deposits, the investor has to transfer funds directly in favour of the issuer.
In case of Gsec (government bonds) transaction investors are required to transfer funds in Tipsons’ account.
When do I have to pay funds? What are different options for funds payment?
Investors have to pay funds depending on the mutually agreed settlement date and product type.
I.e. in the case of corporate bond trade, investors have flexibility to select settlement dates which generally range between trade date plus one or two days.
What if I fail to give funds on the pay-in date?
Investors have to give funds on mutually agreed pay-in/settlement dates and honour the trade.
Are the rates shown on the system fixed?
Rates shown on the system are indicative rates and it is subject to change based on market conditions.
What products are offered by Tipsons?
Tipsons current offering includes;
- Taxable bonds issued by PSUs, Large Corporates, Banks and NBFCs
- Tax-free bonds
- Sovereign Bonds (Government bonds)
- FDs of various Corporates, PSUs and NBFCs
- Perpetual bonds of Banks and corporates
How do I purchase bonds through The Fixed Income?
To purchase bonds from our website, you can;
- Select your investment options from available offers. Click on ‘View Detail’ to get more information on offer or click on ‘Place Order’ to proceed for investment.
- Once you place the order you will get an intimation email from Tipsons. You can view the order under the ‘Pending’ tab of ‘Order History’.
- Post checking availability of quantum and current market level, Tipsons will confirm the order. You will get confirmation/rejection email notification from Tipsons accordingly status under Order History tab will change to ‘Confirmed/Rejected’.
- Trade confirmation slip (Deal confirmation) will be sent on your registered email id with your investment details.
- Payment details will be available under ‘Order History’ once the trade status changed to ‘Confirmed’. Make payment as per the payment details reflected on system or on registered email. Then the bonds will be transferred to your Demat account.
- Get in touch with your RM for Investment guidance in Corporate FDs.
Can I sell bonds through Tipsons?
Yes, you can sell bonds through ‘Bond Request’ form. (Please note that selling bonds will depend on demand-supply and market conditions.)
How do I make payment for investment?
We follow a standard payment process for investment based on investment types.
a. Corporate Bonds – Secondary Market Transactions
For making payment towards your investment in corporate bonds you have two options;
1. Transfer funds to NSCCL (NSE) or ICCL (BSE).
For settling trade through stock exchange (either BSE or NSE) the details will be available on the platform and also in the email sent. You have to make payment via RTGS only to a designated account of the Exchange through which you wish to settle your investment transaction.
Note: Kindly note that payment to Exchange can be made through RTGS only and payment has to be made on settlement date only. When settling through Exchange, Exchange will transfer units of your investment directly into your demat account.
2. Transfer funds to Tipsons Financial Services Private Limited
Alternatively, you can make payment directly in Tipsons’ s designated account using payment gateway or via RTGS to settle your investment transaction.
Note: You get credit for units in your demat account post citing credit of funds in Tipsons designated account.
b. Government Securities – Secondary Market Transactions
You will have to make payment directly in Tipsons' designated account using payment gateway or via RTGS to settle your investment transaction in government bonds.
Note: You get credit for units in your demat account post citing credit of funds in Tipsons designated account.
c. Corporate Bond – Primary Market (Bond IPO)
You will have to make payment to deposit a cheque for investment along with a form to either Tipsons' office to the nearest collection bank branch. The list of collection bank branches will be available with the offer documents.
Note: You get credit for units in your demat account directly by the Issuer if your bids are successfully accepted.
d. Government Securities – Primary Market (Auction mechanism)
This facility is available to the demat account holders of the Tipsons Stock Brokers Private Limited only. Click on the (https://demat.tipsons.com/) if you want to open a demat account with Tipsons to invest in government securities through a primary auction mechanism.
Follow the below mentioned process if you are already having demat account with Tipsons Stock Brokers Private Limited;
1. Transfer your investment amount to the designated account of Tipsons Stock Brokers Private Limited on the cut-off day.
2. Tipsons Stock Brokers will process only those bids for which funds are received in a designated account of Tipsons Stock Brokers Private Limited before cut-off.
3. You will get allotment/rejection intimation from Tipsons.
4. Units will be credited in your demat account directly by Exchanges on T+1 day.
5. Additional amount (additional mark-up or pro rata allotment refund) will be returned on T+1 day.
e. Corporate FDs
You will have to send a cheque favouring issuer directly to Tipsons office along with a filled form. On successful submission to FD issuer, you will get intimation from Tipsons and Issuers directly.
- Tipsons carry 25 years plus extensive experience of bond market
- Tipsons is considered amongst top 5 private category arranger for bond issuance across India
- First end to end technology driven bond trading house of India
- Research based offerings - All product offerings are backed by strong in-depth research.
About Tipsons Unique Offering
- Largest collection of Bonds & Debentures for Individual Investors in India.
- All important information related to bonds available on the platform on fingertip.
- Senior team with extensive bond market experience available to assist on optimised Investment.
Will Tipsons’ existence affect my investment?
No, you will receive your interest and principal accruals on your investment directly from the issuer. Tipsons will assist if in case you require liaison with the issuer.
Whom should I contact if I want to invest and need more information on the bond market?
You may share your query in Live Chat or send us email on firstname.lastname@example.org or call us on landline: 079-66828174/8175.
How much is Tipsons charging for its services?
As of now, Tipsons does not charge anything to its customers.
Is Tipsons a regulated entity?
Tipsons Group companies are regulated and registered either with SEBI or RBI.