By BrandsShouts Bonds are one of the oldest and safest ways to invest money in India, yet most people barely understand them. By 2026, bonds have become far more accessible to retail investors — no longer limited to banks, institutions, or wealthy insiders. You can now buy bonds online, track them digitally, and earn predictable income with much more transparency.
This guide explains everything — what bonds are, how they work, types of bonds in India, where to buy them, taxation, risks, and common mistakes. Nothing is skipped.
What is a bond? (start from zero)
A bond is simply a loan you give.
- You lend money to the government or a company
- In return, they promise:
- Regular interest (called coupon)
- Repayment of principal on maturity
In simple words:
Bond = you are the lender, issuer is the borrower
This is very different from shares, where you become an owner.
How bonds earn you money
Bonds generate returns in two ways:
1. Interest income
- Paid quarterly, half-yearly, or annually
- Fixed or floating rate
2. Capital gain (optional)
- If bond price rises and you sell before maturity
Most bond investors focus on stable income, not price appreciation.
Types of bonds in India (2026)
1. Government bonds (G-Secs)
Issued by the Government of India.
- Safest bonds in India
- Very low risk
- Lower interest compared to corporate bonds
- Backed by the sovereign
Issued through Reserve Bank of India
2. State government bonds (SDLs)
Issued by state governments.
- Slightly higher interest than central government bonds
- Very safe
- Longer maturities
3. Corporate bonds
Issued by companies to raise money.
- Higher interest
- Risk depends on company’s financial health
- Credit rating matters a lot
AAA-rated bonds are safest among corporates.
4. Tax-free bonds
Issued by government-backed institutions.
- Interest income is tax-free
- Limited availability
- Mostly traded in secondary market now
5. Zero-coupon bonds
- No regular interest
- Issued at discount
- Redeemed at face value
Returns come from price difference.
Important bond terms you must understand
- Face value: Original value of bond
- Coupon rate: Interest rate
- Maturity: Date when principal is repaid
- Yield: Actual return considering price and interest
- Credit rating: Safety indicator (AAA safest)
Never buy a bond without checking these.
Who can buy bonds in India?
Any Indian resident can buy bonds:
- Salaried individuals
- Self-employed
- Retired investors
- HUFs
No minimum income requirement.
What you need before buying bonds
In 2026, most bonds require:
- PAN card
- Bank account
- Demat account (mandatory for many bonds)
- Trading account (for exchange purchases)
Some platforms allow bond buying without demat, but demat is preferred.
How to buy bonds in India — all methods
Method 1: Buy bonds directly from government (primary market)
RBI Retail Direct
Retail investors can buy government bonds directly from RBI.
You can buy:
- Treasury bills
- Government securities
- State development loans
Features:
- Zero brokerage
- Direct ownership
- Very safe
Best for conservative, long-term investors.
Method 2: Buy bonds from stock exchange (secondary market)
Bonds are traded on:
- National Stock Exchange
- Bombay Stock Exchange
How it works
- You buy bonds from existing investors
- Prices fluctuate based on interest rates
- Liquidity varies by bond
Advantage:
You can buy bonds below face value sometimes.
Method 3: Buy bonds via online bond platforms
By 2026, many online platforms offer:
- Corporate bonds
- Government bonds
- High-yield bonds
Features:
- Easy comparison
- Clear yields
- Lower minimum investment
Be careful to understand risk ratings.
Method 4: Buy bonds via mutual funds (indirect)
Instead of buying bonds directly, you can invest through:
- Debt mutual funds
- Target maturity funds
Pros:
- Professional management
- Diversification
Cons:
- Expense ratio
- No fixed maturity guarantee
Step-by-step: buying bonds on exchange
- Log into trading app
- Go to bonds or debt section
- Select bond based on:
- Rating
- Yield
- Maturity
- Check price and quantity
- Place buy order
- Bonds credited to demat account
Interest is credited directly to your bank.
Taxation of bonds in India (important)
Interest income
- Fully taxable
- Added to your income
- Taxed as per slab
Capital gains
- Selling before maturity:
- Short-term or long-term tax applies
- Holding till maturity:
- No capital gain, only interest taxed
Tax-free bonds are the exception.
Risks in bond investing
Bonds are safer than shares, but not risk-free.
Main risks:
- Credit risk (issuer default)
- Interest rate risk
- Liquidity risk
- Inflation risk
Government bonds have lowest risk. High-yield corporate bonds have higher risk.
Who should invest in bonds?
Best for:
- Conservative investors
- Retired people
- Income-focused portfolios
- Capital protection seekers
Not ideal for:
- High-growth seekers
- Very short-term traders
- People chasing maximum returns
Common mistakes to avoid
- Ignoring credit ratings
- Buying high yield without understanding risk
- Forgetting tax impact
- Locking money without exit plan
- Confusing yield with coupon rate
How much should you invest in bonds?
General guideline:
- 30%–60% of portfolio (age and risk dependent)
- Higher allocation as you grow older
Bonds bring stability, not excitement.
Final thoughts
By 2026, bond investing in India has become simpler, cleaner, and more transparent than ever before. Whether you want safe government income, steady corporate returns, or tax-efficient structures, bonds deserve a serious place in your portfolio.
Think of bonds as the foundation of wealth — quiet, predictable, and strong.