5 key points to know about NaBFID zero-coupon bonds: Issue price, maturity, returns to taxation

These bonds are named as zero-coupon bonds as they do not have a fixed coupon (interest) rate.

Zero-coupon bonds are debt instruments issued at a discount. They do not pay periodic interest but can be redeemed at the face value on maturity. The income investors earn from zero-coupon bonds depends on the difference between the discounted issue price and the face value.

NaBFID enables infrastructure financing by offering long-term capital for various critical sectors like transportation, energy, logistics, etc.

Let's calculate the issue amount, the issue price per bond, the maturity value per bond:

• Issue amount = maturity amount - discount = ₹20,000 crore-₹10,296.12 crore = ₹9703.88 crore.

• Maturity/face value per bond = ₹20,000 crore/20 lakh = ₹1,00,000

• Indicative issue price per bond = Issue amount/total no. of bonds = ₹9703.99 crore/20 lakh = ₹48,519.40

This can be calculated using the following formula:

CAGR = (FV/PV)^(1/10)-1 = (100000/48519.4)^(1/10)-1 = 7.49% p.a.

Here,

FV = ₹1,00,000

PV = ₹48,519.40

N (period)= 10

The minimum holding period for listed zero-coupon bonds is 12 months. Unlike fixed deposits, where returns are taxed annually at slab rates, zero-coupon bonds are not taxed on an annual accrual basis. Instead, the investors in these bonds have to pay tax on redemption.

Key highlights of NaBFID's zero-coupon bond issue