What are Public Sector Undertaking Bonds (PSU Bonds)?
Public Sector Undertaking Bonds (PSU Bonds) are bonds in which the government shareholding is generally more than 51%. It is a medium and long-term debt instrument issued by public sector companies. Indian Oil Corporation Limited is the biggest PSU in India.
Checking the credit rating and nature of bonds is always recommended. Ensure the credit rating, Investment nature, underlying security, and maturity align with your investment needs. PSU Bonds are considered a secure option for investment.
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More About PSU Bonds in India
PSU bonds meaning – understanding the key terms and PSU bonds meaning can help you have a better understanding. Unlike other bonds, PSU bonds are also preferred by a certain percentage of the investors in India.
PSU Banks, power sector companies, railways, and other organisations issues PSU bonds as they have 51% of the government shareholding with them. These entities could be held by central or state government.
Public Sector Undertaking Bonds (PSU Bonds) unlike other bond types is a good source of investment for investors. It has its own importance. There are many advantages of investing in PSU bonds.
- Comparatively higher rate of interest
- Minimal risk of default
- Suitable for High-income Taxpayers
- Yield in PSU bonds are stable
- It is good option for Long-term Investment
PSU bonds are issued by government entities and hence it is considered one of the safest investment options. The return on investment is also an attraction for many of the investors. You can expect the annual returns at 8% to 9% interest rate. The yield on PSU Bonds in India is higher in comparison to many other debt instruments in the Indian market.
Experts recommends investing in bonds with good credit rating. It can help you earn a fixed income and higher yield on the investment made. Also, the diversification of your portfolio can prove useful in accomplishing your various financial goals in life.
How to Invest in PSU Bonds
Investment in Bonds can be done in a few easy steps with Quick KYC, Bond Selection and a convenient payment gateway.
1.
Complete your KYC
2.
Select your Bond
3.
Make Investment
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PSU Bonds in India Key Features
- Higher interest rate than FDs.
- Generally, these bonds are taxable as per individual income tax slab.
- Low default risk as they are backed by the Government.
Why you should Invest in PSU bonds?
If you have a low risk-taking capacity, you should opt for banking and PSU bonds. Simply because the units belong to PSU companies and banks, which are supported and run by the government. It is a good investment instrument for investors paying higher income tax. The public sector bonds have gained importance among the new investors. The widespread of the awareness may result in increased demand of public sector bonds in the near future.
Advantages of PSU Bonds for Investors
Suitable for High-income Taxpayers
Taxation is the main reason for you to opt for PSU bonds over Credit risk funds. Investors, who continue to hold profits of bonds beyond three years, usually have to pay long term capital gains tax of 20% with indexation benefit. However, if you continue to hold PSU bonds for less than three years, you will have to pay short-term capital gains tax according to your income slab.
Stable Yields
PSU bonds remain invested in the mid segment of the yield curve in the 2-4 years. This segment accounts to have stable yields with much lower volatility levels with respect to the long-term debt funds. Keeping in view of the interest rate, Investors are recommended to have major chunks of their fixed Investment allocation in these products. The annual returns offered in PSU bonds are at the rate of 8% to 9%.
Long-term Investment
PSU bonds are a good investment instrument for investors in India. Keep investing in PSU bonds for a longer duration as it will yield you relatively better returns subject to price fluctuations in the market.
Who Should Invest in PSU Bonds?
PSU bonds are suitable for high income tax payers. It can prove to be a good investment instrument for many investors. Purchasing PSU Bonds is simple and easy. You do not need to be an investment expert.
By investing in top performing public sector bonds, you can diversify your portfolio and achieve certain financial goals.
Choosing the best from the many online platforms for investment in bonds and other securities can help you have a better investment experience.
Digifinn is the dedicated online platform aimed at providing users the easy access to the range of bonds. You can explore the various investment products at Digifinn for the informed decision on buying bonds.
If you wish to explore bonds for the potential investment, create your account at Digifinn