What is the Bond Yield?
A bond's coupon rate is fixed against face value, but what you earn depends on the price you pay. Buy below face value and your yield exceeds the coupon; buy above and it is lower.
Current yield measures annual income against price. Yield to maturity also captures the capital gain or loss when the bond redeems at face value — it is the number that lets you compare bonds fairly.
Formula & worked example
YTM ≈ (Coupon + (Face − Price)/n) / ((Face + Price)/2) × 100
Worked example: a ₹1,000 face bond with a 7.5% coupon bought at ₹950 with 5 years left. The annual coupon is ₹75, giving a current yield of 7.89%. Adding the ₹50 capital gain spread over 5 years gives a YTM of about 8.72% — meaningfully above the coupon.
How to use this bond yield calculator
- Enter the face value (usually ₹1,000 for Indian corporate bonds).
- Enter your actual purchase price, which may differ from face.
- Enter the coupon rate printed on the bond.
- Compare YTM across bonds — never compare coupon rates alone.
Smart tips
- Bond prices move inversely to interest rates. Rising rates push existing bond prices down.
- YTM is the correct comparison metric. Two bonds with identical coupons can have very different yields.
- Check the credit rating: AAA is safest, and anything below AA carries meaningful default risk.
- Interest on bonds is taxed at your slab rate; capital gains on listed bonds held over a year attract 12.5%.
- Government securities (G-Secs) carry no credit risk and can be bought directly via the RBI Retail Direct platform.
Frequently asked questions
What is yield to maturity?
The total annualised return if you hold a bond to maturity, including both coupon income and any capital gain or loss versus the price paid.
Why does bond price move opposite to interest rates?
When new bonds offer higher rates, existing lower-coupon bonds must fall in price to deliver a competitive yield.
Is current yield or YTM more useful?
YTM, because it accounts for the capital gain or loss at redemption. Current yield only measures income against price.
How are bonds taxed in India?
Coupon interest is taxed at your slab rate. Capital gains on listed bonds held over 12 months are taxed at 12.5%.
Want the theory behind the numbers? Read our bond guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 30 Sep 2026. How we check these numbers.