types of government bonds in India

In India, there are various types of government bonds that are issued by the government of India to finance its various development and infrastructure projects. Here are some of the commonly known government bonds in India:

Treasury bills (T-bills): These are short-term debt instruments with a maturity period of up to one year. They are issued at a discount and redeemed at face value. They are usually issued for 91 days, 182 days, and 364 days. For example, if an investor purchases a 91-day T-bill for INR 9,700 and it matures at INR 10,000, the investor will earn a profit of INR 300.
Government bonds: These are long-term debt instruments issued by the government to finance its infrastructure projects. They have a maturity period of 5, 10, 15, 20, and 30 years. The interest rate on these bonds is fixed at the time of issuance and is paid semi-annually. For example, a 10-year government bond with a face value of INR 100 and an interest rate of 6% will pay INR 3 every six months.
Inflation-indexed bonds (IIBs): These bonds are issued by the government to protect investors from inflation. The interest rate on IIBs is linked to the inflation rate. The principal amount is adjusted for inflation every six months. For example, if an investor purchases an IIB for INR 10,000 with an interest rate of 3% and the inflation rate is 5%, the principal amount will be adjusted to INR 10,500 after six months.
Capital Gain Bonds: These bonds are issued under Section 54EC of the Income Tax Act, 1961 to provide tax benefits to investors who have earned capital gains. The bonds have a maturity period of 5 years and the interest rate is fixed at the time of issuance. For example, an investor who has earned capital gains of INR 50 lakhs can invest up to INR 50 lakhs in these bonds and get tax exemption on the capital gains.
State Development Loans (SDLs): These bonds are issued by state governments to finance their development projects. The interest rate on SDLs is higher than that of government bonds due to the higher risk involved. The maturity period of these bonds is usually 10-15 years. For example, if a state government issues SDLs with a face value of INR 1,000 and an interest rate of 7%, an investor who buys the bond for INR 900 will earn INR 70 every year for the next 10-15 years.

These are some of the commonly known government bonds in India. Each bond has its own features and risks. Investors should carefully analyze their investment objectives and risk appetite before investing in any bond.

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