From the Point of view of Tenure

Concept First

The tenure of a debenture — how long the company keeps the borrowed money — determines whether the company is obligated to repay it on a fixed date or can keep it indefinitely. This distinction affects both the company's repayment planning and the investor's certainty of getting their principal back.

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Redeemable Debentures

These are debentures that the company must repay on a specified future date or over a period of time. The repayment can happen in two ways:

• Lump sum — the entire principal is paid back on a single maturity date.
• Instalments — the principal is repaid in parts over the life of the debentures (e.g., ₹100 each year for 5 years).

The redemption itself can be at par (face value) or at a premium (above face value). If redeemed at a premium, the company pays more than the debenture's face value — that extra amount is a loss for the company and is accounted for separately.

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Irredeemable Debentures (Perpetual Debentures)

These are debentures for which the company gives no promise to repay the principal during its normal lifetime. The company simply pays interest year after year, and the principal is returned only in two situations:

• When the company winds up (closes down).
• After the expiry of a very long period (often 99 years or more, effectively making them perpetual).

Because the company never has to repay the principal during its active life, these are also called Perpetual Debentures. From the investor's perspective, the money is locked in indefinitely — they only get interest, not the principal back, unless the company ceases to exist.

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Accounting Treatment — Key Distinction

The accounting treatment for issue of both types is identical (debit Bank, credit Debentures Account). The difference arises only at the time of redemption: …