How do I subscribe to NCD?

The NCD issue process is similar to the IPO process. Investors apply for NCD shares through a broker. Based on the subscription, they receive the number of NCD shares. The NCD’s are credited to the demat account and the money gets deducted from the trading/bank account.

What is the difference between NCD and bonds?

A major difference between NCDs and bonds is that while investing in NCDs, there is no requirement of mortgage or collateral whereas an investment in bonds requires the deposition of an investor’s asset. NCDs are bonds linked with a loan. These serve as debt instruments for building financial capital over time.

Why do companies raise NCD?

Every company that seeks to raise money through an NCD is rated by agencies such as Fitch Ratings, CRISIL, ICRA and CARE. These rating agencies rate the company based on its ability to service its debt on time. So, a lower rating means a higher credit risk.

Is NCD tax free?

Tax implications do apply on NCDs, capital gains need to be paid on the interest earned. However, NCDs held in Demat form are exempted from TDS.

What happens to NCD after maturity?

They cannot be converted into equity or stocks. NCDs have a fixed maturity date and the interest can be paid along with the principal amount either monthly, quarterly, or annually depending on the fixed tenure specified.

How safe are NCDs?

Secured NCDs are considered safer of the two kinds as their issues are backed by the assets of the company. In the event of the company failing to pay on time, then the investors can recover their dues by liquidating the company’s assets. However, the interest offered on NCDs is low.

Is NCD worth buying?

It depends on your personal situation whether it’s worth protecting your no claims discount. If you have five years’ no claims discount, it will significantly cut the cost of your car insurance. You could lose all that for just one accident. You’ll continue to pay less on your premium even if you have an accident.