WHAT ARE TAX-FREE BONDS?
As the name suggests Tax Free Bonds are those bonds that help you get taxation benefits. Nowadays tax free bonds are quite popular as they give an option to the general public to get taxation benefits. Government-backed entities issue tax-free bonds also the interest rate earned from tax-free bonds is tax free under Section 10 (15) (iv) (h) of the Income Tax Act, 1961.
Tax free bonds also help these government-backed entities to raise fund from public and in return they offer them assured rate of return which is tax free.
However, to have a clear understanding on Tax Free Bonds one needs to know what Bonds are. Bonds are a kind of Investment option offered by companies, banks, government securities. The tenure of these bonds vary. People invest in bonds to earn the rate of interest.
WHAT ARE THE OTHER KEY FEATURES OF TAX-FREE BONDS?
- People who invest in tax free bonds have the option to choose from tenure of 10 years, 15years & 20 years
- Tax-Free bonds are listed on NSE / BSE
- The money invested in these bonds has lock-in period but can be traded on listed exchange
- Tax free bonds are Safe investment option
- For investing in tax free bonds individual must have PAN Card as it is mandatory proof
WHAT ARE THE ADVANTAGES OF TAX-FREE BONDS?
- These bonds result in Tax Free Income
- Rate of return on tax free bonds is not only comparatively higher but also tax-free
- Risk involved in these bonds is low, as the companies have a better credit rating
- Since tax free bonds are listed on exchange thus they provide liquidity aswell
- It easier for the investor to handle investment
- These bonds are an ideal option for Individuals who comes under high tax bracket. As post-tax return compared to FD are attractive as well as guaranteed
HOW TO INVEST IN TAX-FREE BONDS?
- Investing in a tax-free bond is quite simple. The Investor has to simply get the application form of the tax-free bond and submit it after duly signing it along with the mandatory documents required.
- The investor also has an option to either apply in Demator Physical Mode, with required documents.
WHO CAN INVEST IN TAX-FREE BONDS?
- Retail Individual Investors (RIIs)
- High Net worth Individuals (HNIs)
- Qualified Institutional Buyers (QIBs)