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Tax Free Bonds vs Long Term Infrastructure Bonds

Published On 22 Jan 2012 By . Under: Useful Tips. Tags:   

What are tax free bonds?

Tax free bonds are bonds issues by entities designated by the Government of India, with the aim of building country’s infrastructure. Some of the designated entities include NHAI and PFC. Tax free bonds generally provide a return of around 8 % and have a maturity period of 10 – 15 years.

Go directly to: Tax Free Bonds vs Infra bonds | Who should invest in tax free bonds?

​Tax Free Bonds vs Long Term Infrastructure Bonds

Tax free bonds differ from Long Term Infrastructure Bonds – Investments made in Long Term Infrastructure Bonds such as SREI Infrastructure Bonds – are exempt from tax upto a limit of Rs 20000 under Section 80 CCF.

infrastructure_bonds_india_2010

However the interest earned from these bonds is taxable. So post tax returns from SREI Infrastructure bonds offering a maximum return of 9.15 % will fall to 6.4 % (for an investor falling under 30 % tax bracket). So, should you invest in infrastructure bonds?
On the other hand investment made under tax free bonds is not exempt from tax however the interest earned is tax free.

Who should invest in tax free bonds?

If you have exhausted 1 lakh limit of your PPF (Yes, now you can invest upto Rs 1 lakh in PPF. Read more) and are looking for tax free investment options then Tax Free bonds are a good bet. They are safe, and offer decent returns which are tax free. However do keep in mind that the investment horizon for these tax free bonds in India is usually 10-15 years.

Tax free bonds in india

Recently NHAI had come with their issue of tax free bonds. The bonds, with a tenor of 10 years and 15 years offered returns of 8.2 per cent and 8.3 per cent respectively. Read more on NHAI tax free bonds ​

Power Finance Corporation had also come out with an issue of Tax Free Bonds which closed on Jan 16, 2012. Read more

Now, Indian Raliways is also coming out with an issue which opens on Jan 25, 2012. The interest rate being offered varies betweem 8.15% to 8.3%. Read more

Useful Links:
Tax free bonds score over SIPs

  • http://profile.yahoo.com/K3FEYXB2BO3YXPVOTSIS36NVQU S-AMIT

    FOR INVESTING IN INFRASTRUCTURE BONDS – CONTACT – AMIT SURPURIYA- 9850873688 – PUNE

    KSHITIJ FINANCIAL SERVICES
    Mutual Fund | Infrastructure Bond | 54EC Capital Gain Bond | Tax Free Bonds | Mediclaim | Company Fixed Deposit

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