Mumbai:Do you like fixed income products where you know how much you are going to get at maturity? If you are imagining fixed deposits, well, that is not the only product available. You can now invest in government securities (G-sec) directly. This year, two online platforms—zerodha and National Stock Exchanges’ NSE gobid—allowed buying and selling of G-sec.

What is it?

In fixed deposits, banks take your money and give you the principal and interest on maturity. In case of G-sec, it is the government who issues the bonds. When you invest in G-sec, it will come with a maturity— short-term and long-term. The money with principal and interest on maturity is paid by the government.

G-secs are sovereign bonds backed by the government. Previously, retail investors didn’t have access to it. After the RBI relaxed the rules, it is available on exchanges. So when RBI conducts auctions on Monday, Tuesday and Wednesday, investors can buy it and get the allotment on Friday. Now, it is available through broking houses and online broking platforms," said Hari K., chief business officer, NSE.

To invest through NSE or Zerodha you need to download the apps or use the websites, do a one-time registration, and place your bids. “Bidding is buying the G-sec you want," said Hari. “We are incentivizing brokers to popularise the scheme. The government can’t give discount as the yields will significantly vary."you need to have a demat account to invest. Once you buy it, it will be in your demat account. It is only this year that direct investment in G-sec became easier.

“Ideally banks could have sold it to investors earlier. Last year, exchanges were allowed to sell it on

their platform," said Nithin Kamath, chief executive officer, Zerodha. For shortterm horizon of three months to one year, the amount is paid on maturity. In case of long-term G-sec, you get the coupons twice a year. “There are usually T-bills of three maturity periods and G-secs of five maturities. Almost 70% of the investment goes to short-term category," said Kamath.

Should you invest?

This is mainly for those looking for fixed income products. You can invest in short-term and long-term bonds. “Anyone looking to invest in fixed deposits, this can be an option," said Kamath. You have to pay tax on your returns. “Interest income is considered as income from other sources and taxes have to be paid as per the income tax slab. If there is any appreciation in the bond price, it is considered capital gains. Long-term capital gain is 10% flat or 20% with indexation. STCG is as per the applicable slab rate," said Kamath. If you’re looking for a longer duration fixed income investment, this could work for you, but look at overall portfolio and asset allocation.