What is Bond?
A bond is a debt security in which the authorized issuer owes the holders a debt and depending on the terms of the bond is obliged to pay interest (the coupon) and/or to repay the principal at a later date, termed maturity. (It is a formal contract to repay borrowed money with an interest at a fixed intervals).When you purchase a bond; you are lending money to the issuer which may be a government, corporation, federal agency, or other entity. In return for the loan, the issuer promises to pay you a specified rate of interest during the life of the bond and to pay back the face value of the bond or the principal when it "matures," or comes due.

Types of Bonds
• Zero coupon bonds - A zero-coupon bond is a bond where the face value is repaid at the time of maturity. This definition assumes a positive time value of money. It does not make periodic interest payments, or have so-called coupons, hence the term zero-coupon bond. When the bond reaches maturity, its investor receives its par value.
• G-Sec Bonds - Government Securities is a bond where government is an issuer or borrower. It is the safest form of bond as it is unlikely that the government defaults. Government issues bonds to raise money for funding infrastructure development, support subsidies or several other initiatives.
• Corporate Bond - Corporate Bond are issued by the corporates i.e. Public or Private companies to investors. The company borrows money from investors and promise to pay interest at regular intervals. The interest rates on such bonds are high compared to government bonds as the probability of government defaulting on interest payments is low compared to a corporate.
• Inflation Linked Bond - In Inflation linked bonds; principal and the interest payments are indexed to inflation. The interest rate is usually lower than that of fixed rate bonds with a comparable maturity.
• Convertible Bond - The holder of a convertible bond has the choice to convert the bond into equity (in the same value as of the bond) of the issuing firm (borrowing firm) on pre-specified terms. This results in an automatic redemption of the bond prior to maturity date.
• Capital Gain Bonds – Capital bonds are being issued as 'Long term specified assets' within the meaning of Sub- Section 54-EC of the Income Tax Act, 1961. Those desirous of availing exemption from capital gains tax under Section 54 EC may invest in these bonds. Capital gains arising from transfer of Long-term capital assets can be invested in these bonds within a period of six months from the date of transfer of the asset for getting exemption from the capital gains tax.

Why Invest in Bonds
For Capital Preservation
For a steady stream of income
Tax Advantage
Low-Risk Investment

Debentures – Meaning
A debenture is an instrument of debt executed by the company acknowledging its obligation to repay the sum at a specified rate and also carrying an interest. It is only one of the methods of raising the loan capital of the company. A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital.