Government bonds are a suitable investment plan for those who want a risk-free, profitable and high-return investment. These government securities are sovereign or treasury bonds issued by the government for many purposes such as public works, infrastructure development, fund raising. The government offers fixed interest rates for such securities. They also offer tenors ranging from months to years. The amount can be withdrawn along with interest at the end of the term.
The importance of government bonds is that they are safe, and you can invest without worrying about market fluctuations. The interest rate of government bonds is mostly fixed, so the investor gets a clear picture of his savings. Although it is safe and profitable, it is essential to discuss it with a financial advisor before making large investments.
Government Bonds Available in India:
• Fixed Rate Bonds: Also known as coupon bonds, fixed rate bonds have a fixed interest rate. The interest rate at the time of the initial investment remains the same throughout the term and is not affected by market fluctuations. Fixed rate bonds can have a term of 5 years to 40 years. These bonds are suitable for those who want long-term investments without risks.
• Sovereign Gold Gold Bonds (SBG): Sovereign Gold Bonds are issued at the value of gram gold. Investors can buy SGB through post offices, banks and stock exchanges. The main attraction of SBG is that you do not have to keep the gold in your hand, so you can avoid costs like locker charges and the risk of theft or loss. SBG offers an interest rate of 2.5% per annum. The value of SBG is linked to the price of gold, so investors can benefit from the rising price of gold along with interest.
• Inflation Indexed Bonds: In such bonds, the principal and interest earned are in line with inflation and deflation. Inflation indexed bonds are issued specifically for retailers. They are tradable in the secondary market.
• 7.75% GOI Savings Bonds: 7.75% GOI Savings Bonds are savings bonds with a maturity of 7 years. As the name suggests, the interest rate is 7.75% per annum. This is a suitable investment for those who want to earn a fixed income while avoiding risk.
• Zero Coupon Bonds: As the name suggests, zero coupon bonds are bonds that do not pay interest. Income from these is obtained by trading them. You can buy existing bonds without issuing new ones. The profit of a zero coupon bond is the difference between the price at which you buy them and the price at which you sell them later.
• PSU Bonds: PSU bonds are bonds of public sector undertakings. These debt securities are issued by government-owned companies in India. Their maturity ranges from 5 to 15 years.
How to invest in government bonds
It is very easy to invest in government bonds in our country. For this, you can invest through GILT mutual funds or you can open a trading demat account with a bank and invest through it.
Let's take a look at the 10 government bonds that give the best returns in India:
1 Tamil Nadu Generation and Distribution Corporation Limited
2 Karnataka State Financial Corporation
3 West Bengal State Electricity Distribution Company Limited
4 Indel Money Limited
5 Punjab Infrastructure Development Board
6 Rajasthan State Road Transport Corporation
7 Rajasthan Rajya Vidyut Prasaran Nigam Limited
8 Kerala Financial Corporation
9 U.P. Power Corporation Limited
10 Greater Hyderabad Municipal Corporation
