Tax Free Bonds

Bonds are a kind of debt instrument. By investing in this type of asset, the investor gives a loan to the issuing entity. The investors will be repaid at the end of the tenure.

These Tax Free Bonds are different kinds of bonds. Those bonds which are exempt from taxation on the interest income under the Income Tax Act, 1961 are called tax-free bonds. These are usually issued by government-backed entities.

“Apart from the higher yield, investors can also expect a capital appreciation in these bonds when interest rates start falling.  “Tax-free bonds work better than bank fixed deposits for those in the higher tax bracket, because of  higher yields and the opportunity of capital appreciation.

Features :

  • Tenure: Choice of 10 years, 15years & 20 years

  • Such bonds are likely to be listed on NSE / BSE

  • No lock-in period

  • Bonds upon trading on NSE/BSE, liquidity is available.

  • Normally seen as safe investment.

  • Could be held either in Demat or Physical form

  • PAN is Mandatory

  • Higher Post Tax Returns

  • Higher Credit Ratings

Generally Tax Fee Bonds are issued by following companies :

  1. HUDCO ( Housing & Urban Development Corporation )

  2. REC ( Rural Electrification Corporation )

  3. NHAI ( National Highways Authority of India )

  4. PFC ( Power Finance Corporation )

  5. NABARD ( National Bank for Agriculture & Rural Development )

  6. IRFC ( Indian Railway Finance Corporation )

  7. IREDA ( Indian Renewable Energy Development Agency Ltd. )

  8. NHB ( National Housing Bank )