Fixed Income Investments: FD, Bonds, NCD, MLD & 54EC Bonds
One place to understand and compare India's fixed income options — bank & corporate FDs, RBI Floating Rate Bonds, 54EC Capital Gain Bonds, NCDs, tax-free bonds, PSU bonds and Market Linked Debentures — with risk, liquidity, taxation and indicative yields.
What is fixed income investing?
Fixed income investments lend your money to a bank, company or the government in return for regular interest and the return of your principal at maturity. They sit at the lower-risk end of a portfolio and are used for stability, predictable income and capital preservation — balancing the ups and downs of equity.
India offers a wide spectrum here — from the familiar bank FD to government-backed bonds and market-linked debentures. The right mix depends on your goal, time horizon, tax slab and how much liquidity you need. This guide explains each option so you can choose wisely.
Fixed income at a glance — comparison
| Product | Risk | Liquidity | Taxation | Yield* |
|---|---|---|---|---|
| Bank FD | Low | Medium (premature allowed) | Interest taxed at slab | Indicative |
| Corporate FD | Moderate | Low | Interest taxed at slab | Often > bank FD |
| RBI Floating Rate Bond | Sovereign | Low (7-yr lock-in) | Fully taxable | ~8.05% p.a. |
| 54EC Capital Gain Bond | Low (AAA PSU) | 5-yr lock-in | Principal exempts LTCG; interest taxable | ~5.25% p.a. |
| Listed NCD | Moderate | Tradable on exchange | LTCG 12.5% (>12m) | Market-linked |
| Secondary NCD | Moderate | Tradable | Depends on holding | Depends on price |
| Tax-Free Bond | Low | Tradable | Interest tax-free | Market-based |
| PSU Bond | Low/Moderate | Tradable | As applicable | Market-based |
| MLD | Structured | Depends | As applicable | Market-linked |
*Yields are indicative and change with market conditions and issuer. Confirm the live rate before investing.
1. Fixed Deposits (FD)
A Fixed Deposit locks a lump sum with a bank for a fixed tenure at a pre-agreed interest rate. It's the simplest, most familiar fixed income product — safe, predictable, and flexible on tenure.
- Safety: bank FDs are covered by DICGC deposit insurance up to ₹5 lakh per bank per depositor.
- Payout: choose cumulative (interest compounds) or non-cumulative (regular payout).
- Senior citizens usually get an extra 0.25%–0.50%.
- Tax: interest is taxed at your slab; TDS applies above the threshold (you can submit Form 15G/15H if eligible).
- Premature withdrawal is allowed, usually with a small penalty.
2. Corporate (Company) Fixed Deposits
Issued by NBFCs and companies, corporate FDs often pay more than bank FDs — but carry more risk, so the issuer's credit rating matters most.
- Prefer AAA-rated issuers for safety; higher yield usually means higher risk.
- Cumulative and non-cumulative (monthly/quarterly/annual) payout options.
- Not covered by DICGC insurance — unlike bank FDs.
- Interest taxed at slab; TDS applies.
3. RBI Floating Rate Savings Bonds
A government-backed bond with a sovereign guarantee — among the safest fixed income options for regular income.
- Interest: currently 8.05% p.a. (Jan–Jun 2026), reset every six months. The rate floats at NSC + 0.35%.
- Tenure / lock-in: 7 years; interest paid semi-annually (1 Jan & 1 Jul). No cumulative option.
- Minimum: ₹1,000, in multiples of ₹1,000, with no upper limit.
- Tax: interest is fully taxable; TDS applies above ₹10,000 a year.
- Note: NRIs are not eligible. Senior citizens may get limited premature exit options.
4. 54EC Capital Gain Bonds
If you've sold a property (land or building) and made a long-term capital gain, 54EC bonds let you save that LTCG tax by reinvesting the gain.
- Who: resident individuals (and others) with LTCG from immovable property. Gains from shares or mutual funds don't qualify.
- Issuers: REC, PFC, IRFC, NHAI (AAA-rated PSUs).
- Limit: up to ₹50 lakh per financial year.
- Window: invest within 6 months of the sale.
- Lock-in: 5 years; interest ~5.25% p.a., paid annually and taxable. Principal saves the LTCG.
5. Non-Convertible Debentures (NCD)
NCDs are debt instruments issued by companies to raise money, paying a fixed coupon. They cannot be converted into shares (hence "non-convertible").
- Secured vs unsecured: secured NCDs are backed by company assets — generally safer.
- Listed vs unlisted: listed NCDs can be traded on the exchange for liquidity.
- Primary vs secondary: buy fresh in a public issue, or from the exchange later.
- Key terms: coupon (interest), credit rating, and Yield to Maturity (YTM).
- Tax: interest at slab; for listed NCDs, LTCG is 12.5% if held over 12 months.
6. Secondary Market NCDs
You can also buy NCDs already trading on the exchange — sometimes at a discount or premium to face value, which changes your effective yield.
- YTM matters more than coupon: the price you pay decides your real return.
- Accrued interest is added when you buy mid-cycle.
- Liquidity can be thin for some bonds — check before relying on an early exit.
- Good for locking in a known yield to maturity if you buy and hold.
7. Market Linked Debentures (MLD)
MLDs are structured debt whose return is linked to an underlying index or benchmark rather than a fixed coupon.
- Structure: return depends on a market index meeting set conditions.
- Principal protection applies only where explicitly stated — read the term sheet.
- Suitable for: informed investors who understand the payoff and risk.
- Tax: as per current rules for MLDs — confirm before investing.
8. Tax-Free & PSU Bonds
Tax-free bonds (older PSU issuances) pay interest that is exempt from income tax — attractive for high tax brackets. They're now mostly available in the secondary market.
- Tax-free interest makes the post-tax yield competitive for high-income investors.
- PSU bonds (REC, PFC, NHAI, etc.) are generally low/moderate risk and tradable.
- Yields move with the market price you pay in the secondary market.
Indicative yields (update before investing)
Rates move constantly. Use these as a rough guide only and confirm the live rate with me before you invest.
| Instrument | Indicative yield | Note |
|---|---|---|
| RBI Floating Rate Bond | ~8.05% p.a. | Jan–Jun 2026; resets half-yearly |
| 54EC Capital Gain Bond | ~5.25% p.a. | Fixed for 5-yr lock-in |
| Bank FD | Indicative | Varies by bank & tenure |
| Corporate FD | Often higher | Depends on rating |
| Listed / Secondary NCD | Market-linked | Depends on issuer & price |
| Tax-Free Bond | Market-based | Post-tax yield attractive in high slabs |
Who should consider fixed income?
🛡️ Conservative savers
Want capital safety and predictable returns over chasing high growth.
👴 Senior citizens
Need regular, dependable income — FDs, RBI bonds, tax-free bonds.
🏠 Property sellers
Have LTCG to shield — 54EC bonds within the 6-month window.
⚖️ Balancers
Want a stable debt allocation alongside equity SIPs.
Frequently asked questions
Which is safer — FD or bonds?
What is the current RBI Floating Rate Bond interest?
How do 54EC bonds save tax?
Can senior citizens invest in these?
Are NCDs taxable?
What is YTM?
RBI Bond vs FD — which is better?
MLD vs NCD — what's the difference?
Can I sell a bond before maturity?
How are listed bonds taxed?
Are corporate FDs safe?
What is the 54EC investment limit?
Who issues 54EC bonds?
Is RBI Floating Rate Bond interest fixed?
Can NRIs invest in RBI Floating Rate Bonds?
What are tax-free bonds?
Is a cancelled cheque or KYC needed?
How do I build a bond/FD ladder?
What is the minimum to start?
Can you help me choose the right mix?
Related guides & tools
Fixed income guidance in Delhi NCR
Looking for FD, Bond or NCD investment guidance? I'll help you choose safe, suitable options and build a laddered, tax-efficient fixed income plan.
Disclaimer: This page is for investor education. Yields and rules are indicative and change with market conditions and regulation; confirm current rates before investing. Fixed income investments carry issuer/credit and interest-rate risks. eMutualFunds is an AMFI-registered Mutual Fund Distributor (ARN-50844), not a fund house or SEBI-registered Investment Adviser. Please read all product documents carefully before investing.