During the current financial year, tax free bonds have received
overwhelming response from investors. Even the Bollywood could not
resist investing due to the attractive benefits. Film stars like Akshay
Kumar, Aamir Khan and Kareena Kapoor Khan invested in IRFC Bonds, while
Ranbir Kapoor and Aishwarya Rai Bachchan parked their money in NHAI
Bonds. If you have not yet invested and wondering what makes this
investment avenue such an attractive option, let me introduce you with
these government bonds.
As the name suggests, Tax-free Bonds are financial instruments which
offer Tax relief to the investors by way of exemptions in Income Tax.
These bonds have emerged as a popular choice among investors due to the
taxation benefit it offers. Tax-free bonds are generally issued by
government enterprises and have a fixed interest rate. As the proceeds
from the bonds are invested in infrastructure projects, they have a
long-term maturity of typically 10, 15 or 20 years. Being liquid, these
bonds are tradable in the secondary market and are listed on exchanges.
They carry credit ratings from one of the rating agencies approved by
SEBI as well as Reserve Bank of India (RBI).
For the financial year 2015-16, government of India authorized state
owned entities to raise Rs. 40,000 Crore through tax free bonds. Most of
the bonds got over subscribed on the very first day of issue opening.
While a major portion of authorized amount has been reached by these
entities but to complete their allocation limit, some of them are coming
up with second round of issue. This is definitely a golden opportunity
for investors who missed it during the first phase.
In the month of February and March these issues are expected to arrive:
Note: Issue dates have not yet been disclosed by the entities. The above mentioned dates are tentative and may or may not change.
These bonds are completely tax free but capital gains made on selling
of tax-free bonds on stock exchanges are taxed. If the holding period is
less than 12 months, capital gains on sale of tax-free bonds on stock
exchanges are taxed as per the tax slab of the investor. If bonds are
held for more than 12 months, the gains are taxed at 10 per cent.
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