Government Bonds
Government bonds are low-risk financial instruments issued by the Central or State Government to raise money for public infrastructure and national development. When you buy these bonds, you are lending money to the government. In return, the government pays you interest and returns your principal investment on a specific maturity date.
Reliable, long-term government securities backed by the Central Government. G-Secs offer fixed returns and are ideal for long-term wealth building.
Key Highlights:
- Returns: 6–8% annually
- Min Investment: ₹10,000
- Duration: 5 to 40 years
- Interest paid: every 6 months
Long-term state development loans offered by state governments. SDLs offer slightly higher returns than G-Secs and are ideal for long-term wealth building.
Key Highlights:
- Returns: 6.5–8.25% annually
- Min Investment: ₹10,000
- Duration: 5 to 40 year
- Interest paid: every 6 months
Short-term treasury bills issued by the Central Government. T-bills are issued at a discount and redeemed at face value within a year. They are ideal for parking funds or quick cash needs.
Key Highlights:
- Returns: 5.5–7%
- Min Investment: ₹10,000
- Duration: 91, 182, or 364 days
- Return payout: At maturity
Quick Comparison:
Interest (coupon) payout
paid every 6 months
Zero-coupon bonds; issued at discount, paid at maturity
paid every 6 months
Min Investment
₹10,000 (may vary according to cut-off price)
₹10,000
₹10,000 (may vary according to cut-off price)
| Feature | G‑Sec (Central Govt Bonds) | T‑Bill (Treasury Bill) | SDL (State Govt Loans) |
|---|---|---|---|
Issuer | Central Government | Central Government | State Governments |
Duration | 5–40 years | 91, 182, or 364 days | 5–40 years |
Interest (coupon) payout | paid every 6 months | Zero-coupon bonds; issued at discount, paid at maturity | paid every 6 months |
Returns | ~5.5–7% | ~6–8% | ~6.5–8.25% |
Tradable in secondary markets | Yes | Yes | Yes |
Min Investment | ₹10,000 (may vary according to cut-off price) | ₹10,000 | ₹10,000 (may vary according to cut-off price) |
Pledge for margin | Yes | No | No |
New issues | Typically every Tuesday | Typically every Monday | Typically every Monday |
Bidding duration | Typically 3 days | Typically 2 days | Typically 1 day |
Ideal for | Long-term income, stable portfolio, collateral use | Short-term cash parking | Slightly higher yield and long-term investing |
Frequently Asked Questions (FAQs)
1. Is it safe to invest in Government bonds?
Yes. Government bonds—whether issued by the Central or State Government—are among the safest financial instruments in India.
2. Can I exit before maturity?
Yes. All government bonds are listed on the stock exchanges and can be sold anytime in the secondary market. Prices may vary based on interest rate trends in the market.
3. Are government bonds taxable?
Yes. The interest you earn on G-Secs and SDLs is fully taxable as per your income tax slab, but no TDS is deducted. For T-Bills, the gain (difference between purchase price and face value) is treated as short-term capital gain and also taxed at your slab rate. If you sell bonds in the secondary market, capital gains tax may apply based on how long you held them.