The term redemption implies the discharge of an obligation arising out of the contractual obligations created through the debenture Trust Deed. In other words, discharge of the liability on account of debentures is called redemption of debenture. The redemption of debentures is made by the company in accordance with the terms and conditions of issue. Debentures may be redeemable at par, premium or discount, but in present scenario redemption of debentures at par and at premium is most popular. The redemption can be done out of profits or from the fresh issue of debentures or shares.
Redemption of debentures may be done by the following methods
(i) By paying after stipulated period
(ii) By annual drawing
(iii) By conversion into shares or new debentures
(iv) By purchasing own debentures in the open market
(v) At the option of the company
