Investors who want a safe and steady return, without investing in gold or the stock market, may consider Zero Coupon Bonds (ZCBs) issued by Power Finance Corporation (PFC).
PFC is a public sector company, which adds an extra layer of trust for conservative investors.
According to reports, these bonds have a tenure of 10 years and 1 month, and the last date to invest is January 30.
How These Bonds Work
These Zero Coupon Bonds will be listed on the stock exchange, allowing investors to sell them before maturity if they need money.
For retail investors, one bond costs ₹50,780. After 10 years and 1 month, the maturity value will be ₹1 lakh.
This offers an annual return of 6.95%, which comes to about 6.04% after tax.
For investments above ₹10 lakh, each bond is priced at ₹51,263, giving a slightly lower post-tax return of around 5.96%.
Why These Bonds Are Better Than Fixed Deposits
Experts believe these bonds offer better returns than bank fixed deposits.
For example, SBI’s 10-year fixed deposit currently offers 6.05% interest, but after tax, investors in higher tax brackets earn only about 4.24%.
Tax-free bonds also offer returns of just 5.1% to 5.15%, which is lower than what PFC’s Zero Coupon Bonds provide after tax.
Potential for Extra Gains
Market experts say that if interest rates fall by 0.25% to 0.50% over the next 12 to 18 months, the value of these bonds could rise.
This means investors may also benefit from capital appreciation if they choose to sell the bonds before maturity.
For long-term investors seeking predictable returns and lower risk, PFC’s Zero Coupon Bonds stand out as a strong alternative to traditional fixed-income options.
