Bonds are financial instruments that represent a loan made by an investor to a borrower, typically a corporation or government entity. They are a form of fixed-income securities and come in various types, each with its own unique features and benefits.
Capital gain bonds are issued by specified institutions and are used to save tax on capital gains arising from the sale of a property. Investors can reinvest the gains in these bonds within a specific time frame to avail of tax benefits.
1. Deferring capital gains tax.
2. Investment diversification.
3. Long-term investment opportunity.
1. Limited tenure and lock-in period.
2. Moderate interest rates compared to other bonds.
Bonds play a crucial role in diversifying investment portfolios and meeting various financial objectives. Understanding the nuances of different bond types can help investors make informed decisions aligned with their risk tolerance, financial goals, and tax considerations.
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