Fixed Deposits & Bonds
Corporate FDs, government securities, tax-free and capital-gain bonds for the stable slice.
What it is
Every portfolio needs a portion that does not move much. Fixed deposits and bonds are how most households build that stable slice — a known rate, a known date, and no daily price to watch.
Corporate fixed deposits usually pay more than bank deposits, and the reason is straightforward: they carry more credit risk. The credit rating is the single most important thing to check, and it should be checked at renewal too, not only at the start. A high rate on a weak rating is not a bargain.
Bonds cover a wider range. Government securities carry sovereign backing. Tax-free bonds pay interest exempt from income tax, which makes their effective yield attractive to higher tax brackets. Capital-gain bonds under Section 54EC allow deferral of long-term capital gains tax on property sales, within a limit and a defined window.
The key difference from a mutual fund is that you are lending, not owning. Your return is the agreed interest, no more and no less — provided the issuer pays. That is a genuinely different risk from market risk, and it deserves to be assessed separately.
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See available deposits and bonds
Deposits and bonds are issued by the respective company, bank or issuer. Interest rates, credit rating and repayment are the responsibility of that issuer, not of Money Pathshala.
At a glance
The options, side by side
| Instrument | Issued by | Key characteristic |
|---|---|---|
| Bank FD | Bank | Deposit insurance up to ₹5 lakh per bank per depositor |
| Corporate FD | Company | Higher rate, credit risk, no deposit insurance |
| Government securities | Government of India | Sovereign backing |
| Tax-free bonds | Approved public sector issuers | Interest exempt from income tax |
| 54EC capital-gain bonds | NHAI, REC and similar | Defers LTCG tax on property, 5-year lock-in |
Before you commit
What could go wrong
- Corporate deposits carry credit risk — if the issuer defaults, both interest and principal are at risk.
- Bank deposit insurance covers up to ₹5 lakh per depositor per bank, including principal and interest.
- Interest on most deposits and bonds is taxable at your slab rate, and TDS applies above threshold limits.
- Bond prices fall when interest rates rise, which matters if you need to sell before maturity.
- Premature withdrawal, where permitted at all, usually attracts a penalty and a lower rate.
Mutual fund investments are subject to market risks. Read all scheme related documents carefully. Insurance is the subject matter of solicitation. Loan and deposit products are governed by the terms of the respective lender or issuer.
No. A bank deposit carries deposit insurance up to ₹5 lakh per depositor per bank; a corporate deposit carries none. The extra interest a company offers is compensation for that extra risk, and it should be treated as such rather than as free money.
It is an independent agency's assessment of the issuer's ability to pay you back on time. Higher rated issuers pay less because they are safer. Check the rating before investing, and check it again at renewal — ratings are revised, sometimes downwards.
They can be, if you have made a long-term capital gain on property and want to defer the tax. The interest rate is modest and the money is locked for five years, so the benefit is the tax deferral rather than the return. Whether it suits your situation is a question for your tax consultant.
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