List of Zero Coupon Bonds in India 2026

Zero coupon bonds are gaining attention among investors looking for predictable long-term returns without the need for periodic interest payments. These bonds are issued at a discounted price and redeemed at their full face value at maturity, allowing investors to earn returns from the price difference. 

In India, several government and corporate institutions issue zero coupon bonds, making them a useful option for investors planning future financial goals such as education, retirement, or major expenses. 

Continue reading for a detailed list of zero coupon bonds in India in 2026, along with key details that can help investors understand available options and evaluate their investment decisions.

What are Zero Coupon Bonds?

A zero coupon bond is a debt instrument which does not pay period interest during the tenure.

Investors purchase such bonds at a price which is lower than the face value of the bond but receive full face value at the time of maturity. Investors can purchase these bonds at a discounted price and can redeem at face value after maturity.

Key Features & Benefits of Zero Coupon Bonds

Issued at a Discount: Zero coupon bonds are issued at a price lower than their face value. Investors purchase the bond at this discounted price and receive the full face value when the bond matures.

No Periodic Interest Payments: Zero coupon bonds do not provide periodic interest payouts. The return is earned through the difference between the purchase price and the maturity value.

Fixed Maturity Value: The maturity amount of the bond is predetermined at the time of investment. This allows investors to know exactly how much they will receive at maturity.

Suitable for Long-Term Goals: These bonds are generally issued with longer maturities, making them suitable for long-term financial planning such as retirement, education funding, or other future expenses.

No Reinvestment Risk: Since zero coupon bonds do not pay periodic interest, investors do not need to reinvest interest payments. This eliminates reinvestment risk during the tenure of the bond.

Portfolio Diversification: Adding zero coupon bonds to a portfolio can help diversify investments by including fixed-income instruments that are not directly linked to equity market fluctuations.

Potential Capital Appreciation: The value of zero coupon bonds may increase over time, especially if interest rates decline, which can benefit investors who decide to sell the bond in the secondary market before maturity.

List of Zero-Coupon Bonds 

Who Should Invest in Zero Coupon Bonds?

Zero coupon bonds are suitable for investors who prefer predictable returns and do not require regular interest payouts. Since these bonds are issued at a discount and redeemed at face value at maturity, they are ideal for individuals planning long-term financial goals.

Long-Term Investors

Investors with long investment horizons may consider zero coupon bonds because the returns accumulate over time and are received as a lump sum at maturity.

Investors Planning for Future Goals

These bonds can be useful for those saving for specific future needs such as higher education, retirement, or major life expenses, where funds are required at a predetermined time.

Investors Who Prefer Predictable Returns

People who want a clear idea of their returns at the time of investment may find zero coupon bonds suitable, as the maturity value is known in advance.

Tax Planning Investors

Some zero coupon bonds, depending on the issuer and structure, may offer certain tax considerations that investors evaluate while planning their investments.

Investors Diversifying Their Portfolio

Zero coupon bonds can be used to diversify a portfolio by adding fixed-income instruments that behave differently from market-linked investments.

Risks Involved in Zero Coupon Bonds

While zero coupon bonds can offer predictable returns at maturity, they also carry certain risks that investors should understand before investing.

Interest Rate Risk

Zero coupon bonds are highly sensitive to changes in interest rates. If market interest rates rise, the value of existing zero coupon bonds in the secondary market may fall, which can impact investors who plan to sell before maturity.

Credit Risk

Like other debt instruments, zero coupon bonds carry the risk that the issuer may fail to repay the principal at maturity. The risk level depends on the creditworthiness of the issuing institution.

Liquidity Risk

Some zero coupon bonds may have limited trading activity in the secondary market. This can make it difficult for investors to sell the bond before maturity without accepting a lower price.

Inflation Risk

Since these bonds do not pay periodic interest, rising inflation can reduce the real value of the final payout received at maturity.

Taxation Risk

In many cases, investors may need to pay taxes on the accrued interest each year even though they do not receive any cash payments until maturity. This can affect cash flow planning.

Long Lock-in Period

Zero coupon bonds are usually issued with longer maturities. Investors who need funds earlier may have to sell the bond in the secondary market, where the price may fluctuate.

Tax Applicability on Zero Coupon Bonds

Taxation on zero coupon bonds in India is governed by the provisions of the Income Tax Act, 1961. Unlike regular bonds, zero coupon bonds do not pay periodic interest. Instead, they are issued at a discount and redeemed at face value at maturity, and the difference between the issue price and the redemption value is treated as income for tax purposes.

Capital Gains Tax on Maturity or Sale

The income earned from zero coupon bonds is generally treated as capital gains. If the bond is held until maturity, the difference between the purchase price and the redemption value is taxed as capital gains.

Long-Term Capital Gains (LTCG)

If the zero coupon bond is held for more than 12 months, the gains may qualify as long-term capital gains, which are taxed at the applicable LTCG rate as per prevailing tax rules.

Short-Term Capital Gains (STCG)

If the bond is sold within 12 months of purchase, the profit is treated as short-term capital gains and taxed according to the investor’s income tax slab.

Tax on Secondary Market Sale

If an investor sells the bond in the secondary market before maturity, the profit or loss arising from the sale will also be taxed under the capital gains category.

No Periodic Interest Taxation

Since zero coupon bonds do not pay periodic interest, there is no annual interest income to declare. Tax is generally applicable when the bond is sold or redeemed.

Disclaimer

The zero coupon bond data on this page is sourced from the NSDL website and is based on publicly available market information as on 11 March 2026. Prices, yields, trade values, and other related details are subject to change in real time depending on market movements and liquidity. This content is intended solely for informational and educational purposes and should not be considered as investment advice, recommendation, or an offer to buy or sell any securities.