WEIGH YOUR OPTIONS
Here’s a comparison of L&T Finance non-convertible debentures (NCD) with other debt instruments.
L&T Finance NCD
Bank FD
Company FD
Interest rate/returns in % (per annum)
8.5 (annual interest), 8.4 (semi-annual interest)
6.25-7.25
Liquidity
Listed on NSE and BSE
Yes
Exit load/premature penalty
Nil2
Interest loss penalty + 1% penalty3
Around 1%
Minimum investment (Rs)
10,000
500-10,000
Tenure (years)
3
Tax on Interest /dividend income
8-12
Long-term bond fund
Market-linked1
Post Office Monthly Income Scheme
Government of India bond
8
8
After 1 year
No
Up to 0.5%, if withdrawn before 6 months
2% if withdrawn between 1year and 3 years; 1% before 6 years
NA
10,000
5,000
1,500
1,000
3
3
Open-ended
6
6
Income tax rates
Income tax rates
Income tax rates
14.163% dividend distribution tax
Income tax rates
Income tax rates
Tax on principal
Nil
Nil
Nil
10.30% long-term capital gains tax if withdrawn after a year
Nil
Nil
Credit rating
AA+
NR
Government of India backed
Government of India backed
Depends on 1-2 days after applying for a withdrawal the company
Nil, but principal Not Rated to and interest up AAA to Rs1 lakh is insured4
1Debt funds invest their corpuses in debt markets and thus get affected by market volatility; 2selling of NCDs on stock exchanges will happen at market price. Therefore, yields may get hit; 3interest loss 4on account of stringent Reserve Bank of
penalty means you get interest applicable only for the number of days you stay invested. Some banks don't levy penalty and some waive penalty at their discretion; India guidelines, investments beyond Rs1 lakh are also perceived to be safe. Banks are perceived to be safer; FD: fixed deposit; NR: not required; NA: not applicable; NSE: National Stock Exchange; BSE: Bombay Stock Exchange Source: Mint research