After redemption of debentures, debenture redemption reserve is to be transferred to general reserve.

The Capital Redemption Reserve is a fund that secures a creditor. Debenture Redemption Reserve is for the purpose of security payments only.

Debenture is a debt instrument to raise funds. It has a maturity period associated with it. At the end of the maturity, the company(borrower) should return the interest and principal amount.

Debenture Redemption Reserve is an amount kept as reserve for paying the debenture holder at the end of the maturity period.

No Debentures can not be redeemed out of capital only. Gov of India and SEBI has indirectly placed restrictions on redemption of debentures. Now it is compulsory to create Debenture Redemption Reserve at-least 50% of the debentures issued.

Indian Companies Act of 1956 added during an amendment in the year 2000. It states Indian company that issues debentures must offer debenture redemption service to protect investors against the possibility of company default. If a company does not create a reserve within 12 months of issuing the debentures, they will be required to pay 2 percent interest in penalty to the debenture holders. Only debentures that were issued after the amendment in 2000 are subject to the debenture redemption service.