All portfolios should be diversified between equity and debt so that the overall risk is controlled. Among debt instruments in India, there are various types of bonds available, with different features—duration, tax benefits, coupon rates, and lock-ins. Some types of bonds offer taxation benefits, and some have coupon rates higher than fixed deposit rates. Yet others can be invested in to avoid paying long-term capital gains tax. While you need to hold some till maturity to avail tax benefit, you may have to pay tax on some if you hold till maturity. Take a look at the applicable taxation before investing.
