InvestorQ : Are a bond and a debenture the same and if so why are they known by different names?
Niti Shenoi made post

Are a bond and a debenture the same and if so why are they known by different names?

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swati Bakhda answered.
3 years ago
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Long-term debt securities issued by the Government of India or any of the State Government’s or undertakings owned by them or by development financial institutions are called as bonds. Instruments issued by other entities are called debentures. The difference between the two is actually a function of where they are registered and pay stamp duty and how they trade.

Debenture stamp duty is a state subject and the duty varies from state to state. There are two kinds of stamp duties levied on debentures viz. issuance and transfer. Issuance stamp duty is paid in the state where the principal mortgage deed is registered. Over the years, issuance stamp duties have been coming down. Stamp duty on transfer is paid to the state in which the registered office of the company is located. Transfer stamp duty remains high in many states and is probably the biggest deterrent for trading in debentures in physical segment, resulting in lack of liquidity.

On issuance, stamp duty is linked to mortgage creation, wherever applicable while on transfer, it is levied in accordance with the laws of the state in which the registered office of the company in question is located. A debenture transfer has to be effected through a transfer form as prescribed for under Companies Act.

Issuance of stamp duty on bonds is under Indian Stamps Act 1899 (Central Act). A bond is transferable by endorsement and delivery without payment of any transfer stamp duty.

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