How to Buy NCDs in India?

Investors in India are now looking for options that offer fixed returns, are safe and give better income than FDs and this is where NCDs or Non-Convertible Debentures have emerged as a strong option. Amidst rising interest rates and market volatility in 2025, NCDs are becoming a popular option among investors for a stable and reliable income.

If you want to know what NCDs are, how they work, and how you can buy them online, then this guide is for you.

What are NCDs?

NCDs, or Non-Convertible Debentures, are debt instruments in which you lend money to a company for a fixed period in return for a fixed interest rate. This is a fixed income investment like a bank’s fixed deposit (FD), but the returns may be slightly higher.

NCDs are called “non-convertible” because they cannot be converted into company shares in the future. That is, it is completely a loan which the company takes from you and returns the principal amount along with interest to you on the fixed date.

Which companies issue NCDs?

In India, NCDs are usually issued by large corporate companies and NBFCs (Non-Banking Financial Companies). When these entities need capital for business, they raise funds from common investors through NCDs instead of taking a loan from a bank. These issues are regulated by SEBI, which ensures transparency and fair process. However, repayment of interest and principal depends entirely on the issuing company. Every public NCD issue is preceded by an official document called a prospectus, which contains complete details of how much the company is borrowing, for how many years, at what interest rate and on what terms.

How many types of NCDs are there?

There are mainly two types of NCDs: Secured NCDs and Unsecured NCDs.

• Secured NCDs : Secured NCDs are such debentures in which the company assures the investors that if it fails to pay the interest or principal on time, then the investors’ money will be paid by selling its assets. To understand it in simple language, there is some asset or guarantee of the company behind these NCDs.

• Unsecured NCDs : In unsecured NCDs, the company does not give any guarantee that if it fails to pay the money, how will your money be safe. That is, there is no asset backup behind these debentures.

If the company defaults on such NCDs, it may be difficult for investors to get the money. For this reason, the interest rate on these is often high so that the attractiveness remains in return for the risk.

Why is a credit rating important?

Every NCD is given a rating by a credit rating agency (like CRISIL, ICRA, CARE) which indicates how reliable the company is. A AAA rating is considered the safest, while BBB or lower ratings indicate higher risk. So, before investing in any NCD, make sure to check its rating – this will determine your returns and safety.

Read Also: Non-Convertible Debenture (NCD) vs Fixed Deposit (FD): Meaning, Features, and Differences Explained

Why Consider Buying NCDs?

In an environment where the market is volatile and the interest rates of traditional investments like FDs have become limited, NCDs are becoming a stable and reliable source of income. If you want regular income and want to invest by keeping a little distance from risk, then NCD can be a better option. Know its features below:

• Reliable income with fixed interest rate : NCDs give you a pre-determined interest rate, due to which the investment return is clear from day one and the return on investment is not affected by market volatility.
• Better returns than FDs : Today many companies are offering interest up to 8% – 10%, which is much higher than the normal bank FD especially on long-term investments.
• Regulatory security and transparency : Being regulated by SEBI, the process of NCDs is clear and secure, which gives additional confidence to investors.
• Flexible interest payment options : You can choose to take interest every month, quarterly or lump sum on maturity as per your need.
• Easy buying and selling on the exchange : If you have invested in a listed NCD, you can sell it on NSE or BSE if required thus ensuring liquidity.

How to Buy NCD in India: Step-by-Step Process

If you want to invest in NCDs, then read the easy steps given below carefully.

Step 1: It is necessary to have an active demat account

NCDs are credited to your demat account just like shares. If you do not have a demat account, you can easily open an account with a trusted platform like Pocketful. The entire process is digital and is completed in a few minutes.

Step 2: Keep an eye on upcoming NCD issues

Every month some companies issue new NCDs. You can see their information in the “Upcoming NCDs” section on NSE India, BSE India, SEBI website. From here you get the issue date, interest rate, and other important information in advance.

Step 3: Analyze the NCD Issue

Before investing in NCD, definitely see what is the credit rating of that company, what is the interest rate, for how many years, and what will be the method of interest payment. Be careful if an issue is offering unusually high interest but has a low rating.

Step 4: Apply during public issue

When a new NCD issue opens, you can apply online. All you have to do is login to the app or website and apply in the relevant issue. You can make the payment through UPI or net banking. Usually the minimum investment amount is ₹10,000.

Step 5: You can also buy from the secondary market

If an issue is already listed, you can also buy it in the secondary market from NSE or BSE. For this, search by entering the name or ISIN of the relevant NCD. From here you can also see its last traded price, yield-to-maturity (YTM) and liquidity.

Read Also: Debentures: Meaning, Features, Types, Benefits and Risks

Important Factors to Check Before You Buy NCDs

Before investing in NCDs, it is very important to understand some important things, because investing only by looking at the high interest rate can cause loss in the future. By keeping in mind the points mentioned below, you can take a better and safer decision.

• Credit rating : The most important aspect of any NCD is its credit rating. This rating is given by agencies like CRISIL, ICRA, or CARE and it tells whether the company will be able to return the interest and principal on time or not. AAA rating is considered the safest, while A or BBB rating has some risk attached. It is wise to stay away from issues with a lower rating than this.
• Coupon rate vs inflation : Whatever be the interest of NCD, the real benefit from it is only when it is above inflation. If the coupon rate of NCD is 9% but inflation is running at 6%, then your real return will be considered only 3%. Therefore, along with the interest rate, definitely look at the inflation trend.
• Tenure and liquidity : Every NCD has a fixed maturity period some are 1 year and some are 5–10 years. Pay attention to whether the NCD is listed on the exchange (NSE/BSE), and what its trading volume is. Because if you need, will you be able to sell it before time?
• Call and put option : Some NCDs have a call option, through which the company can return the money before the stipulated time. At the same time, the put option also gives the investor the right to get the money redeemed from the company at the stipulated time. So before applying, check whether there is any early redemption clause.
• Secured or unsecured : If the NCD is secured, then your money is protected by the company’s assets. But if the NCD is unsecured, then it may be difficult to get the money if the company defaults. So understand the structure of the NCD and if needed, give preference to secured NCDs.

Where to Track Your NCD Investments?

After investing in NCDs, it is important to keep monitoring your portfolio. This will ensure you get accurate information about interest payments, maturity date and holding value. You can easily track your investments through the following means:

• Demat account and broker platform : If you have invested through a platform like Pocketful, you can track your investment live by going to the holdings section of the app or website.
• Consolidated Statement of CDSL/NSDL : Every month, CDSL or NSDL sends a consolidated account statement (CAS) containing complete details of all your demat investments be it shares or NCDs. You can download it via email or portal.
• Interest statement for tax : At the end of the year, the details of interest received on NCDs are sent to you by your broker firm or company. This interest statement is very useful to you at the time of tax filing, because interest income is added to your income.

Tax Implications of NCDs in India

Interest from NCDs is included in your other income and is taxed as per your income tax slab whether you are in the 5%, 20% or 30% tax bracket. There is no indexation or exemption for it in FY 2024–25

TDS mechanism – who deducts, when and how much?

If the aggregate of NCD interest paid by a company in a financial year exceeds ₹10,000, the company applies 10% TDS under Section 193 or 194A. This rate can go up to 20% if you do not provide PAN. But if your total taxable income is below the minimum limit, TDS can be avoided by filing Form 15G/15H.

Capital Gain Tax – When you sell NCDs

• If you sell a listed NCD before 12 months, it is called Short‑Term Capital Gain (STCG) and will be taxed as per your income slab.
• If you sell after 12 months, it becomes Long‑Term Capital Gain (LTCG), which is taxed at 12.5% (without indexation) in FY 2024–25. Note that indexation benefit is not available on NCDs.

TDS exemption – special facility for senior citizens

As per Budget 2025, TDS exemption on interest income for senior citizens (60+) has been increased to ₹1,00,000 This improves their cash flow and reduces their tax burden.

Pros and Cons of Buying NCDs

Pros

• Higher returns than FDs : NCDs often offer higher interest rates than Fixed Deposits such as 9%-11%, which can improve your returns.
• Regular and fixed income : These debentures pay interest at a fixed interval monthly, quarterly or annually. This gives you a predictable cash flow.
• Variety of investment options : In NCDs, you can choose the option according to your needs such as secured vs unsecured, or short-term vs long-term.
• Trading possible due to listing on the exchange : You can buy/sell listed NCDs in the secondary market, which also provides some liquidity.

Cons

• Risk of default : If the company gets into a financial crisis, there may be a default in returning the interest or principal. Unsecured NCDs have higher risk.
• Premature withdrawal is not possible : NCDs have a lock-in period and unlike FDs, you cannot break it in the middle. Yes, you can sell it in the secondary market once it is listed, but that is also not easy.
• Low liquidity : Not every NCD finds a buyer in the secondary market, due to which liquidity risk remains.
• Market risk and rating downgrade : If the company’s credit rating goes down, then both the value and demand of your NCD can fall.

Conclusion

NCDs have become a sensible investment option in today’s times for those who want stable earnings but prefer to stay away from the volatility of the stock market. If you invest after carefully understanding the rating of the company, interest rate and tenure, then it can be a reliable investment for the long term. But it is most important to gather information before every investment and take a wise decision.

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