NetReturns

Beginner guide · 5-minute read

Company bonds and NCDs, explained simply

A company bond, often sold as an NCD (non-convertible debenture), is a loan you give a company. It pays you interest, usually every year or month, and returns your money on a set date. It pays more than a bank FD because it's riskier: if the company fails, you can lose money.

Checked on 15 Oct 2026 against SEBI and income-tax rules for FY 2026-27, and AMFI's notes on the overseas investment limit.

In one minute

How you buy
When a company issues them, or later on the stock exchange through a demat account.
What it pays
A fixed rate set by the company. A higher rate usually means a higher risk.
Safety
Not insured. Check the credit rating and whether the bond is secured against assets.
Tax
Interest is taxed at your slab rate, and TDS may be deducted.

How it works, with real numbers

Lend ₹1,00,000 at 9% for 3 years with yearly interest and you'd get ₹9,000 a year, about ₹6,192 after tax at 30%. Your ₹1,00,000 comes back at the end, if the company can pay.

A 3-year bank FD at 6.3% paying yearly would give about ₹4,334 a year after tax. The difference, about ₹1,858 a year, is what you're paid for taking the company's risk instead of an insured bank's.

Try the NCD calculator

Pros and cons

Good things

  • Higher fixed interest. Usually more than bank FDs.
  • Regular income. Yearly or monthly interest, or all at maturity.
  • You choose the term. Issues often offer several lengths.
  • Listed. You can try to sell on the exchange before maturity.

Things to watch

  • The company can default. It can pay late, pay less, or stop paying.
  • Not insured. Unlike bank deposits, there's no ₹5 lakh cover.
  • Hard to sell. Few NCDs trade, so you may not get a fair price quickly.
  • Interest is taxed at your slab. At 30%, a 9% bond keeps about 6.2%.

Is it right for you?

A good fit if you…

  • want a fixed income and can check a company's strength
  • are spreading money across several bonds

Not a good fit if you…

  • can't afford to lose any of it: bank FDs are insured up to ₹5 lakh
  • may need the money before maturity

Mistakes to avoid

  • Chasing the highest rate. An unusually high rate is a warning sign, not a bargain.
  • Too much in one company. Spread it across several issuers.
  • Skipping the rating and security. AAA-rated, secured bonds are the safest kind.

How to start

  1. Apply in a public issue through your broker or bank (UPI or ASBA), or buy a listed NCD on the exchange.
  2. Check the credit rating, whether it's secured, and the company's finances.
  3. Choose yearly, monthly or cumulative interest.
  4. Hold to maturity, or sell on the exchange if you need to.

Words you'll see

NCD
Non-convertible debenture: a company bond that can't be turned into shares.
Coupon
The interest rate the bond pays.
Credit rating
A rating agency's grade of how likely the company is to pay; AAA is the highest.
Secured
Backed by the company's assets, which can be sold to repay you if it defaults.
Maturity
The date your money comes back.
Try it with your own numbersSee the tax, what you keep, and how it compares with other options.
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This guide explains how things work. It is not advice on what you should invest in. NetReturns is not SEBI-registered.

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