These bonds are traded on BSE and NSE. Some tax-free bonds are trading well. Their yield is also attractive. Investing in them is quite safe and gives regular income. These bonds are especially attractive for taxpayers falling in higher tax slabs of income tax.

Bonds of these companies are available for investment

A total of 14 government infrastructure companies, including NHAI, IRFC and Power Finance Corporation (PFC), have issued tax-free bonds, which are traded on NSE and BSE. These bonds were issued between 2012 and 2016. They were issued for 10 years, 15 years and 20 years. Their interest is paid every year. Most of these bonds have the highest rating of ‘AAA’.

Trading takes place on NSE and BSE

There is no tax on the interest earned on tax-free bonds. Since these bonds are issued by government companies, they are guaranteed by the Indian Government. Therefore, investing in them is completely safe. Therefore, these bonds are suitable for those investors who want regular income along with the safety of their capital. Out of a total of 193 series of tax-free bonds, 92 series have matured. The rest are traded on NSE and BSE.

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Keep these things in mind while investing

If you want to invest in these tax-free bonds, then you should invest in bonds with high liquidity and yield to maturity (YTM). YTM means the annual return that the investor is expected to get if he maintains his investment till maturity. According to data from HDFC Securities, most of the bonds in this series have low liquidity. But there are 20 such series whose YTM is high and liquidity is also good.

Attractive for investors falling in higher tax slab

According to HDFC Securities, there are 15 series of tax-free bonds that trade at a relatively stable YTM of 5.5 to 5.9 per cent. This return is comparable to the returns on corporate bonds and bank fixed deposits. However, interest on corporate bonds and bank FDs is taxable. This reduces the post-tax returns for investors in the 30 per cent tax slab to around 5.1 per cent and 4.3 per cent, respectively. Hence, investing in tax-free bonds is beneficial for investors in higher tax slabs.

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Let us know about those great plans through which you can not only get good returns but also get tax exemption through these investments.

Senior Citizen Saving Scheme

This scheme has been specially designed by the government for people who are above 60 years of age. The main objective of starting this is to provide regular income to senior citizens even in old age. The good thing is that investment in this scheme can be started with only Rs 1000. Investors can invest up to a maximum of Rs 15 lakh if ​​they wish. The maturity period in this scheme is of 5 years. On which interest is given at an interest rate of 8 percent. Not only this, the investment made in Senior Citizen Saving Scheme can also provide tax benefit up to Rs 1.5 lakh per year under Section 80C of the Income Tax Act.

Tax free bonds

Senior citizens can also earn good income by investing in tax free bonds. These bonds are issued by the subsidiaries of the government. In which investment is done without risk. After a certain time, you will get the return, which is completely tax free.

National Savings Certificate

Those who invest in this scheme get tremendous benefit of compounding interest. That means you will also get a good return on your investment and you can also save tax through this. In this, the interest rate has been increased to 7 percent. This can be a better investment option for senior citizens.

ELSS Scheme

ELSS, also known as Tax Saving Mutual Fund Scheme, is an equity based mutual fund. 20 percent of which is invested in the form of debt and the remaining 80 percent is invested in the stock market. Along with good returns, it can also prove to be a good option for tax saving. Under Section 80C of the Income Tax Department, tax saving of up to Rs 1.50 lakh can be done in this.

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Amid low interest rates on deposits and high volatility in stock markets, tax and investment experts are recommending investing in debt and liquid funds for the short term. Equity returns are expected to remain low due to rising repo rate and volatility. Hence, Indian households are expected to move towards safer options like savings bank FDs, gold, small savings schemes.

However, experts are of the opinion that tax-saving bonds and maturity plans are a better option than bank FDs for high-income individuals who are coming under the tax net. He said that bank FDs will not give more than 5 per cent returns in the short term, while tax saving bonds will give 1.5 per cent to 2 per cent more returns than the bank’s fixed deposit rates for any period.

Higher interest in tax-free bonds
According to a Live Mint report, Vikram Dalal, MD, Synergy Capital Services, said on tax-saving bonds versus bank FDs, “For high net worth individuals, I opt for tax free bonds and target maturity plans, such as Bharat Bond. Would recommend ETFs. Bank FD will give you 5.5 per cent to 5.55 per cent return and tax free bonds like Bharat Bond ETF will give returns of 7.25 per cent. Long term debt mutuals like PSU & Banking, Income or GIFT bonds can give good returns in times of rising interest rates.

Looking for safe investment options
He said that in the era of rapidly rising repo rate, investors are looking for safe investment options, as well as seeking such returns where they can manage inflation. Central PSU bonds, GoI/SDL securities and AAA rated private sector bonds are the preferred investment options.

Anand Rathi Global Finance CEO Jugal Mantri said that tax-free bonds are a better option in the rising interest rate regime. “Investors opt for debt instruments based on three basic parameters – safety of capital, liquidity and regular returns. AAA rated public sector bonds have the highest security. Once listed, it can be invested and withdrawn at any time. Also, more interest is available than FD.

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