Deep Discount Debt

Zero Coupon Bonds

Build wealth with clean compounding. Invest in zero-coupon bonds issued at deep discounts to their face value and redeem them for full payouts at maturity.

Deep Onboarding Discount

Purchase bonds at prices far below their maturity face value (e.g. pay ₹6,000 for a ₹10,000 face value bond).

No Reinvestment Risks

Avoid the hassle of constantly reinvesting periodic coupon interest. Enjoy seamless long-term compound growth.

Clear Return Predictability

Know your exact yields on day one. The difference between purchase cost and maturity value is guaranteed.

0% Coupon

Capital Gains Benefits

Unlike traditional bonds whose coupons are taxed annually at your standard tax slab rate, zero-coupon bonds generally accrue capital gains. Holding them for more than 12 months (listed) or 36 months (unlisted) qualifies for Long-Term Capital Gains (LTCG) tax rates.

✔ No annual tax declarations on coupons
✔ Long-term wealth planning benefits
✔ Tradable via Demat accounts online

Bond Mechanics

How Do Zero Coupon Bonds Work?

Zero-coupon bonds are structured differently from traditional debentures. Here is a review of their core mechanics:

Deep Discount Purchase: Issuer sells the bond at a fraction of its final redemption price. (e.g. a ₹1,00,000 face-value bond is sold for ₹60,000 based on yield and maturity).
Zero Interest Payouts: No monthly, quarterly, or annual coupon credits are paid to your bank account. Cash stays within the asset.
Full Par Maturity: On the maturity date, the issuer pays you the full face value (₹1,00,000). Your return is the capital appreciation of ₹40,000.

FAQs

Frequently Asked Questions

Find immediate answers regarding zero-coupon discount bonds.

What is a zero-coupon bond?

A zero-coupon bond (also called a deep discount bond) is a debt security that does not make periodic interest (coupon) payments to the holder. Instead, it is issued at a deep discount to its face value and redeemed at full face value on maturity.

How do investors earn returns on zero-coupon bonds?

Your return is the difference between the discounted purchase price and the face value paid at maturity. For example, if you purchase a bond for ₹70,000 and redeem it for its face value of ₹1,00,000 at maturity, your profit is ₹30,000.

How are zero-coupon bonds taxed in India?

The difference between the issue price and the maturity value is taxed as Capital Gains. If the bond is listed and held for more than 12 months, it is taxed as Long-Term Capital Gains (LTCG) at 10% without indexation, making it highly tax-efficient compared to normal interest slabs.