Types of debentures

Debentures can be classified on the basis of:

  1. Transferability/ Registration


  • Registered Debentures- Name, address, and other holding details are registered with the issuing company.

The amount of registered debentures is payable only to those debenture holders whose name is mentioned in the register of the company.


If the debenture is transferred by the holder, it is necessary to inform the issuing company for updating its records.

  • Unregistered/ Bearer Debentures- these debentures are not recorded in a register of the company.

Bearer debentures can be transferred by mere delivery to the new holder.

The interest and principal are paid to the person who produces the coupons attached to the debenture certificate.

  1. Security


  • Secured/ Mortgage Debentures- these debentures are secured by a charge on the asset or set of assets of the company.

The holders of secured debentures can recover the principal and unpaid interest amount out of the assets mortgaged by the company.


These debentures are further classified into– first and second mortgaged debentures.


At the time of liquidation of the company, first mortgaged debentures have the first charge over the assets of the company whereas second mortgaged debentures have secondary charge.

  • Unsecured/ Simple Debentures- these debentures are not secured by any asset and are issued solely on the credibility of the company.

  1. Redemption


  • Redeemable Debentures- these debentures are issued for a fixed period. The principal amount is repaid to the holders on the specified date.

  • Non-redeemable/ Perpetual Debentures- these debentures do not have any date of redemption.


These debentures are redeemed either when the company chooses to pay back or at the time of liquidation.

The company may pay back to reduce its liability and notifies the debenture holder by issuing due notice for it.

  1. Convertibility

  • Convertible Debentures- these debentures can be converted, fully or partly, into shares after a specified period of time.


      Convertible debentures are further classified into:

  • Fully convertible debentures can be completely converted into equity shares.
  • Partly convertible debentures have two parts- Convertible part which is converted into shares as per the agreement. Non-convertible part is repaid after the expiry of the agreed period.


  • Non-convertible Debentures- these debentures do not have the feature of conversion and are repaid on maturity.


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What is a debenture?

Debenture is one of the financial securities traded in capital markets.

It is defined as a long-term promissory note for raising loan capital where the company promises to pay interest and principal as stipulated.

Who can issue debentures?

Debenture can be issued by both corporations and governments.

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An alternative form of debenture is a bond, mostly issued by public sector companies.

What are the features of debentures?

  1. Debenture is a form of loan capital for the company.

  1. The purchaser of debenture is called debenture holder. So, a debenture holder is a creditor of the company.

  1. The par value of a debenture is the face value mentioned on the debenture certificate.

  1. The interest rate on a debenture is fixed and known at the time of purchase. Interest is a percentage of this par value.

  1. The legal agreement between company and debenture holder is called indenture or debenture trust deed. It includes the specific terms of the agreement, description of debenture, rights of debentures holder, etc.

  1. Debenture can either be secured or unsecured. Secured debenture is secured by lien on the company’s specific asset. However, unsecured debenture is not protected by any security.


  1. The credit rating of debenture indicates the degree of its safety. Credit ratings are provided by Credit Rating and Information Services of India (CRISIL) and few other rating companies like CARE and ICRA in India.

  1. Companies issue debenture in different denominations. But, public sector companies issue bonds in the denomination of Rs. 1000.

  1. Debenture is issued for a specific period of time.

  1. The maturity of debenture is the time period until the company returns the par value to debenture holder and terminates the debenture. Usually, a debenture is redeemed after 7 to 10 years of payment.

What are the advantages of debentures?

  • Fixed and stable interest income.
  • Definite maturity period
  • Ease of trading and liquidity


  • Comparatively safer investment as debenture holder has specific or a floating charge on the secured asset of the company
  • Preferential right of payment at the time of liquidation of the company
  • Interest is protected as per indenture provisions and SEBI guidelines

What are the disadvantages of debentures?

  • No voting rights
  • Returns limited to the extent of interest, irrespective to higher or lower earnings of the company
  • No share in profits


  • Debenture holder is only creditor to the company, has no ownership of company
  • Interest on debentures is fully taxable

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Retirement planning tips

Start planning for retirement from the day you start earning- is certainly the best advice given, but is hardly ever followed.


Retirement is one of the most significant phases of our lives.

Sensible financial planning during your working years can help you realize the dream of a happy and comfortable retirement.


Here are few tips you can follow:

  1. Focus on starting today

If you have just realised that you need to plan for your retirement, start saving and investing as much as you can now.


Tip: When young, you can grow your money considerably with the power of compound interest.  In such investments, the interest is paid on the principal investment and the accumulated interests of previous period.

  1. Increase investment as your income grows

You should take into account the rising inflation to build your retirement corpus.

So each time, you get a raise, increase your retirement savings too.


Tip: Few plans have the option to increase the amount automatically- once half yearly or annually for an amount of your choice eg. Rs. 1000 or Rs. 2000 increase every month there on. Do consult a financial advisor for more such options.

  1. Diversify your savings

Your investment portfolio should be according to your age, risk appetite, liquidity, inflation, liabilities and goals.

Diversify your savings in various categories to optimise returns.


Tip: At the age of 50 you should revisit your retirement portfolio and check the allocation of your investments.

  1. Appropriate Health Cover

Health insurance plan by your employer will cover you only till you are employed with them.

It is always better to buy personal health insurance plan including your spouse for lifetime benefit.

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Tip: Low premium, no worry of pre-existing illness waiting period, adequate cover and tax benefits are few advantages of buying a health plan when young.

  1. Pay down debts

It is easier to save for retirement when you don’t have any student debt or credit card debt.


  1. Buy a house instead of paying rent

If you are living on rent, major share of your income goes towards rent.

Having your own house will give you a sense of security and reduce your expenses considerably.


Tip: You can consider buying a retirement home in some other city or your native place where prices are within your budget.

  1. Life insurance

Loss of the sole breadwinner can risk the survival of any family.


Therefore it is essential to create financial security for your family by investing in a life insurance plan.

  1. Don’t touch the money until you need it

You should avoid spending the retirement corpus so that your money can gain from the power of compounding.

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Tip: At the time of job change, rather than withdrawing your PF balance, you should transfer it to the new employer account.

Other options of withdrawing for specific purposes such as buying or building a house, your child’s marriage, or in medical emergencies should also be avoided.

  1. Contingency fund

Your retirement fund should not be used for meeting contingencies.

Build a separate contingency fund which should help you meet expenses of at least six months.


After retirement, you can use this fund as per your needs.

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Do I need insurance?

Most people have this question while buying insurance.

We are well aware that life is uncertain and unpredictable. A contingency or adversity can happen at any point in life. Insurance protects you and your family in such unseen circumstances.

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“Insurance is not for the person who passes away, it is for those who survive,” goes a popular saying.

We cannot predict when insurance will be needed. However, with insurance planning, we can ensure that we are adequately covered against insurable risks.

Some possible risks could be:

Loss of a loved one

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It is difficult to imagine, but loss of the breadwinner of the family could have a major impact on the financial situation of the family. An insurance policy can help in paying various household expenses, repay loans or simply act as financial security for the family.

Medical contingency

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An unexpected injury or illness could deplete your wealth considerably if you are not adequately insured. You might save money by not opting for a health insurance plan. However, in the long run you might have to pay a very high cost for being uninsured.

Risk to assets


All assets carry a risk of damage by natural disaster, theft or any other calamity. Replacement of these assets can have tremendous financial implications. Insurance can help restore these assets.


Insurance planning takes into account these risks and provides adequate coverage against them. There is no risk not worth insuring yourself against. Insurance is a measure to guard against these risks – the risks of your dreams going awry due to events beyond your control.

Few benefits of insurance are:

  • Financial security of life and assets in case of an unfortunate event
  • Long-term wealth creation
  • Tax saving by way of deductions from income
  • Financial Planning for specific goals such as buying a new house, planning for the education or marriage of children, retirement planning, etc.
  • Security to obtain a loan
  • Retirement income throughout old age
  • Covers health and medical costs


This is exactly how insurance works. When you buy insurance, it is like sand. But it turns into gold when it impacts you. And so you wish you had some more!

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9 Tax saving tips


At the end of every financial year most individuals seek options to minimise taxes.  Here are few tax saving tips:

1. Avoid the last minute rush

Due to various reasons, many of us keep postponing our tax planning and do it in the last few months of the financial year. In this last minute rush, you might not choose the right tax saving scheme/investment.

In fact the right time to do the tax planning is the beginning of the financial year.

2. Salary Restructuring

Restructuring of salary (permitted in few Companies) includes restructuring of few components of the salary which could reduce your tax liability.


Perks and expenses such as medical allowance, transport allowance, education allowance, uniform expenses (if any), and telephone expenses can be included as part of the salary.

Bills of the actual expenses incurred for these allowances need to be submitted.

You can also opt for food coupons instead of lunch allowances.

3. House Rent Allowance (HRA)

If you reside in a rented house, you can claim HRA, which could be partially or completely exempt from taxes.  

House rent expenses are deducted from the gross taxable income.


The deduction available is the minimum of the following amounts:

  • Actual HRA received
  • 50% of [Basic salary + DA] for those living in metro cities (40% for non-metros)
  • Actual rent paid less 10% of salary
  1. Section 80C and other deductions




  1. Leave Travel Allowance (LTA) and Medical Expense

Tax exemption on LTA can be claimed when you apply for leave from your company for travel and have an actual journey.

Only the cost of travel for the trip is included in LTA. Hotel accommodation, food, etc. cannot be claimed for this exemption.

LTA exemption is limited to two times in a block of 4 years.


Other prominent exemption is medical expenses incurred by self and his/her family in a financial year.

This implies you do not have to pay tax on the amount of medical bills submitted in a financial year.

You can claim tax exemption only up to Rs.15,000 per year.

  1. Tax planning as per financial goals

Identifying your financial needs/goals is important.

Your financial goals could be your children’s higher education, buying a home, retirement planning or buying a car.


Tax investment planning can be done in a manner that aligns with your financial goals. This would mean your tax investments can provide tax relief as wells as help you to achieve your future financial requirements.

  1. Understanding future commitments in tax saving schemes

Before choosing a tax saving scheme, understand your future financial commitments.

Tax saving options like NSC and Mutual fund tax saving (ELSS) need only one time investment. However, PPF  and life insurance require periodical investments year after year.


You need to check if you will be able to meet the future commitments at ease, if you need such a future commitment, if you can commit for periodical future payments, etc.

If there is a change in law, you may not get any tax exemption for your future payment. so, you need to consider if you want to buy the scheme irrespective of tax benefit for future.

  1. Income changes- Redo your tax plan

If you change your job or there are any changes in your income, you need to change your tax planning accordingly.

  1. On time tax declarations

One of the most vital tips for tax saving is timely tax declaration.

Employers need to pay advance tax every quarter. Therefore, they deduct TDS every month from your salary.

If the planned tax saving, investment and expenses of the year is not declared, the projected tax will be higher. The employer would deduct TDS according to this projection.


While filing your income tax return, you can claim a refund for these extra taxes paid. However, to avoid tax deduction, it is always better to submit a tax declaration to your employer at the beginning of the year.

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What is wealth management?

The value and need of money constantly changes in our lives. As wealth grows, needs become more diverse. Every individual has unique financial needs. Wealth managers understand these specific financial goals and provide appropriate financial products and services.

Wealth managers like Fortuna Wealth Management provide services such as:


  • Financial planning
  • Portfolio management
  • Retirement planning
  • Children’s education planning
  • Insurance
  • Mutual funds
  • Virtual real estate
  • Gated community plots
  • Capital gain bond
  • Pan card services
  • Income tax filing
  • Stocks and shares

Financial planning starts with a comprehensive financial analysis of the client. This helps in understanding his or her financial situation, needs, goals and preferences.

Risk profiling is done to find out the client’s risk tolerance.

On the basis of financial planning and risk profiling,  personalised wealth management plan is developed.

The client’s financial portfolio is reviewed regularly to update his or her goals, review and rebalance the financial portfolio and check if any additional services needed.

Wealth management services provide a holistic approach to manage and plan a client’s current and future financial needs. These needs could be as diverse as planning for a child’s higher education, wedding, buy a house or even planning for retirement. Thus, wealth management provides financial opportunities for all such needs by managing and potentially growing the client’s wealth.

For more information please visit http://www.fortunawealth.in