How much interest we can get from NCD/Bond investment?
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You can get 7-12% from Listed Corporate bonds with min of BBB rating.
From investing in NCDs or Bonds, you can earn interest rates ranging from 7% to 10% if held until maturity, providing a potential source of income with varying payout frequencies.
The amount of interest you can earn from NCDs (Non-Convertible Debentures) or bonds depends on several factors:
1. **Coupon Rate**: This is the fixed annual interest rate that the issuer agrees to pay on the face value of the bond. For example, if a bond has a face value of ₹10,000 and a coupon rate of 8%, you would receive ₹800 annually as interest income.
2. **Face Value**: This is the nominal value of the bond, typically ₹1,000 or ₹10,000 per unit. The interest payments are calculated based on this face value.
3. **Maturity Period**: The duration for which you hold the bond affects the total interest earned. Longer maturity periods typically offer higher coupon rates but may also involve greater risk.
4. **Tax Implications**: The interest income from NCDs or bonds is taxable as per your income tax slab. Consider the tax implications while calculating your net returns.
5. **Credit Rating and Risk**: Bonds with higher credit ratings usually offer lower interest rates compared to riskier bonds. However, they provide more security against default.
6. **Market Conditions**: Interest rates prevailing in the market at the time of bond issuance can affect the coupon rate. If interest rates rise after you purchase a bond, the fixed interest payments may become less attractive compared to newer bonds offering higher rates.
It’s essential to carefully evaluate the terms of the bond, including the coupon rate, maturity period, credit rating, and market conditions, to estimate the interest income you can expect from your NCD or bond investment. Additionally, consider diversifying your bond portfolio to manage risk and optimize returns.