Tax Free Bond
TAX FREE BOND
Bonds are a kind of debt instrument. These bonds are mostly issued by government enterprises and pay a fixed coupon rate (interest rate). Tax free bonds have emerged as highly popular investment option among investors due to the taxation benefit that they offer. These bonds, generally issued by Government backed entities, are exempt from taxation on the interest income received from such instruments under the Income Tax Act, 1961.
Who Can Invest
- Retail Individual Investors (RIIs)
- High Net worth Individuals (HNIs)
- Corporates/Trusts
- Qualified Institutional Buyers (QIBs)
Features
- Tenure: Choice of 10 years, 15years & 20 years
- Such bonds are likely to be listed on NSE / BSE
- No lock-in period
- Interest Paid Annually Directly Into Bank Account
- Bonds upon trading on NSE/BSE, liquidity is available.
- Could be held either in Demat or Physical form
Advantages
- Tax-Free Income
- There is no deduction of tax at source (TDS)
- Low risk, since companies have a better credit rating
- Listing of bonds on exchanges provides liquidity
- Ratings by agencies like CARE, FITCH, CRISIL, ICRA enables you to assess the quality of instruments
