Long Term Bonds Investment Maturing after 1 Years

These bonds can be considered by investors planning for long-term financial goals such as children's higher education, marriage expenses, purchasing a home or retirement. They can also help investors lock in the coupon rate offered by a fixed-rate bond at the time of investment.

However, investing for a longer period also means keeping your money committed for longer. Therefore, it is important to understand the bond's maturity, interest payments, credit rating and associated risks before investing.

More About Long-Term Bonds Maturing After a year

The remaining maturity of a bond refers to the time left until its scheduled maturity date. A bond qualifies as a long-term bond under this category when it has more than five years remaining before maturity.

For example, if a bond is scheduled to mature in 2035 and has more than five years left until maturity, it falls under the long-term bond category. As time passes, its remaining maturity decreases.

This classification is based on the remaining maturity of the bond, irrespective of its original tenure or the type of issuer.

Investors can find long-term bonds across different issuer categories, including corporate companies, banks, public sector undertakings (PSUs), government securities and state-related issuers, subject to their listing and availability.

What Are Long-Term Bonds?

Long-term bonds are debt instruments that have a remaining maturity of more than five years. When you invest in a bond, you lend money to the issuer for a specified period. In return, the issuer is obligated to make interest payments according to the bond's terms and repay the principal as per its repayment schedule.

Most fixed-rate bonds carry a predetermined coupon rate. This means the coupon rate generally remains unchanged throughout the bond's tenure, although the actual payment frequency depends on the terms of the individual bond.

For example, a bond may offer monthly, quarterly, half-yearly or annual interest payments. Some bonds may also have different principal repayment structures, so investors should check the repayment schedule before investing.

Two important terms to understand when evaluating long-term bonds are:

1. Coupon Rate: The coupon rate is the annual interest rate specified by the issuer on the bond's face value. It determines the interest payable to the investor, subject to the bond's terms.

2. Yield to Maturity (YTM): YTM represents the annualised return an investor may earn if the bond is purchased at its current market price and held until maturity, assuming the issuer makes all scheduled payments and the cash flows are received as expected.

The coupon rate and YTM are not necessarily the same. YTM also considers the bond's purchase price, remaining maturity, interest payments and redemption value.

Why Do Investors Choose Long-Term Bonds?

Long-term bonds can be useful for investors who have financial goals several years away. Here are some reasons investors consider them:

1. Planning for Long-Term Financial Goals

Many financial goals require planning several years in advance. These may include children's higher education, marriage expenses, purchasing a house, retirement planning or building a financial corpus for future requirements.

Investors can consider bonds whose maturity dates are aligned with their expected financial needs. This can help them plan when their principal is scheduled to be repaid, subject to the issuer meeting its obligations.

2. Locking in the Prevailing Coupon Rate

One of the key attractions of fixed-rate long-term bonds is the ability to lock in the coupon rate offered at the time of investment.

For example, suppose you invest in a fixed-rate bond offering a 9% annual coupon. If market interest rates fall in the following years, the bond will generally continue paying interest at its original 9% coupon rate, as specified in its terms.

This can be beneficial when prevailing interest rates decline. However, if market interest rates rise, the market value of your existing bond may fall, particularly if you want to sell it before maturity.

3. Planning Long-Term Cash Flows

Investors looking to generate periodic interest income over several years may consider long-term bonds with suitable coupon payment schedules.

Depending on the bond's terms, interest may be paid monthly, quarterly, half-yearly or annually. Investors can select a payment frequency that aligns with their cash-flow requirements.

4. Building a Retirement Portfolio

Investors planning for retirement may consider long-term bonds as one component of a diversified investment portfolio.

For example, someone planning to retire in the next 8–10 years may evaluate bonds with maturity dates that broadly match their retirement timeline. This can help them plan future cash flows and scheduled principal repayments.

However, investors should also consider inflation, credit quality, liquidity and their need for access to money before choosing a long-term bond.

Current Yields on Long-Term Bonds Available on GoldenPi

Long-term bonds can offer different yields depending on the issuer, credit rating, coupon structure, market price and remaining maturity.

Currently, the following bonds in this category offer indicative YTMs ranging from 8.80% to 10.54%.

Note: The yields, ratings, maturity dates and payment frequencies above are indicative and based on the listings considered for this article. Bond availability and market yields can change. Investors should check the latest listing details and applicable rating disclosures on GoldenPi before investing. Credit ratings are specific to individual instruments and may change over time.

The above examples also show that long-term bonds are not limited to one type of issuer. Investors can explore bonds issued by financial institutions and state-related entities, depending on availability and their investment preferences.

A Simple Example of Investing in Long-Term Bonds

Let's understand how a long-term bond can generate interest income through a simple example.

Suppose you invest ₹50,000 in a bond with the following features:

• Investment amount: ₹50,000
• Annual coupon rate: 9%
• Interest payment frequency: Quarterly
• Remaining maturity: 9 years

For this example, assume that you purchase the bond at its face value of ₹50,000 and that the entire face value remains outstanding throughout the nine-year period.

Step 1: Calculate the Annual Interest

The bond offers a 9% annual coupon.

Annual interest = ₹50,000 × 9%

Annual interest = ₹4,500

Step 2: Calculate the Quarterly Interest

Since the bond pays interest every three months, the annual interest is divided into four instalments.

Quarterly interest = ₹4,500 ÷ 4

Quarterly interest = ₹1,125

Therefore, you receive ₹1,125 every quarter, subject to the issuer making the scheduled payments.

Step 3: Calculate the Total Interest Over Nine Years

Over nine years, the bond will have 36 quarterly interest payments.

Total interest = ₹1,125 × 36

Total interest = ₹40,500

Therefore, over the nine-year period, you would receive approximately ₹40,500 as gross interest income.

Step 4: Principal Repayment at Maturity

If the bond has a bullet repayment structure, the ₹50,000 principal is scheduled to be repaid at maturity.

In this example, the total cash inflow over nine years would be:

• Total interest received: ₹40,500
• Principal repayment: ₹50,000
• Total cash inflow: ₹90,500

This is a simplified illustration before taxes and other applicable costs. The actual investment return may differ depending on the purchase price, bond structure, payment schedule and issuer's ability to meet its obligations. The principal may also be repaid in instalments if the bond's terms specify an amortisation schedule.

Risks to Understand Before Investing in Long-Term Bonds

Long-term bonds can help investors plan their finances over an extended period, but they also carry risks that should be considered before investing.

1. Credit Risk

Credit risk refers to the possibility that the issuer may fail to make interest payments or repay the principal on time.

Over a period of five to ten years or longer, an issuer's financial position, business performance and ability to meet its debt obligations may change. Its credit rating may also be upgraded or downgraded during the bond's tenure.

A credit rating can help investors assess the issuer's creditworthiness, but it is not a guarantee of repayment. Investors should review the latest rating rationale, financial statements and other disclosures before investing.

2. Interest Rate Risk

Long-term bonds are generally more sensitive to changes in market interest rates than shorter-duration bonds.

When market interest rates rise, the prices of existing fixed-rate bonds generally fall. When market interest rates decline, their prices may rise.

For example, suppose you purchase a long-term bond offering a 9% coupon. If similar bonds start offering 10% in the market, your existing 9% bond may become less attractive to potential buyers. Its market price may therefore decline.

This risk is particularly important if you need to sell your bond before maturity. If you hold the bond until maturity, market price movements alone do not change the contractual coupon rate, although repayment still depends on the issuer meeting its obligations.

3. Liquidity Risk

Liquidity risk refers to the difficulty of selling a bond when you need money.

Some long-term bonds may have limited trading activity on stock exchanges. This means there may not always be enough buyers when you want to sell.

If you need to exit before maturity, you may have to sell at a price lower than your purchase price or accept a less favourable yield. Therefore, investors should avoid investing money that they may need immediately.

4. Tenure and Investment Horizon Risk

Long-term bonds require investors to remain invested for an extended period. This can create a mismatch if their financial needs or circumstances change before the bond matures.

For example, an investor may purchase a bond maturing in 2035 to meet a future financial goal. However, if an unexpected expense arises in 2030, they may need to sell the bond before maturity.

The bond's market price at that time may be lower than the original purchase price, and finding a buyer may also be difficult.

There is also the risk that inflation may reduce the purchasing power of the interest income received over several years.

Therefore, investors should match the bond's remaining maturity with their financial goals, maintain sufficient liquidity for emergencies and avoid committing their entire investment corpus to long-term instruments.

How to Invest in Long-Term Bonds on GoldenPi

GoldenPi is a SEBI-registered Online Bond Platform Provider (OBPP) that allows investors to explore and invest in listed bonds online.

With more than 20 lakh registered users and zero defaults reported on bonds facilitated through the platform to date, GoldenPi provides access to a wide range of listed bonds along with relevant investment information.

Here is how you can invest in long-term bonds on GoldenPi:

1. Log in: Log in to your KYC-verified GoldenPi account.
2. Explore Bonds: Open the Bonds Maturing After 5 Years (Long Term) section to explore available listings.
3. Compare Bonds: Filter and compare bonds based on credit rating, issuer, yield, payment frequency and maturity date.
4. Review Documents: Check the bond's coupon rate, YTM, repayment schedule, offer document and the issuer's latest financial information before investing.
5. Complete Your Investment: Select the bond and complete the investment process through your linked bank account.
6. Demat Credit: After successful settlement, the bonds are credited to your NSDL or CDSL demat account.

GoldenPi makes it easier for investors to explore different bond options, compare relevant details and make informed investment decisions.

Taxation on Long-Term Bonds

Returns earned from bonds are subject to applicable income-tax provisions in India.

• Interest Income: Interest earned from bonds is generally taxable at the investor's applicable income-tax slab rate. TDS is generally deducted at 10% when the applicable threshold of ₹10,000 is crossed, subject to prevailing provisions.
• Form 121: From 1 April 2026, Form 121 replaced the earlier Forms 15G and 15H. Eligible resident investors whose estimated tax liability is nil can submit this declaration to the bond issuer to avoid TDS on specified interest income, subject to applicable conditions. Avoiding TDS does not automatically make the interest tax-free.
• Capital Gains: If an investor sells a bond before maturity at a profit, the gain may be taxable. The applicable tax treatment depends on the bond, holding period and prevailing tax laws.

Since tax rules may change, investors should check the latest provisions or consult a tax professional.

Conclusion

Long-term bonds can be a useful investment option for individuals planning financial goals that are more than five years away. They allow investors to earn interest over an extended period and, in the case of fixed-rate bonds, retain the original coupon rate throughout the tenure, subject to the issuer meeting its payment obligations.

Whether you are planning for your child's higher education, marriage expenses, retirement or another long-term financial goal, selecting a bond with a suitable maturity date and payment structure can help you plan your investments.

However, a longer maturity also means greater exposure to interest rate movements, credit risk, liquidity constraints and changes in personal financial requirements.

Before investing, evaluate the issuer's creditworthiness, compare the bond's YTM with its coupon rate, understand its repayment schedule and ensure that its maturity aligns with your investment horizon.

GoldenPi provides access to a range of listed bonds, helping investors explore long-term investment opportunities and make informed decisions based on their financial goals.