Bond refers to a security issued by a Company, Financial Institution or Government, which offers regular or fixed payment of interest in return for borrowed money for a certain period of time.
What is a tax-free bond?
Security issued by a company, financial institution or the government
Offers regular or fixed payment of interest in return for borrowed money for a specified period
Why are these bonds called "tax-free"?
You don’t have to pay any tax on the interest earned from these bonds (Income Tax Act, 1961)
Who provides tax-free bonds?
Government-backed entities
Public undertakings, such as IRFC, PFC, NHAI, HUDCO, REC, NTPC, NHPC, Indian Renewable Energy Development Agency (IREDA)
How do tax-free bonds work?
Tenure : You can invest for up to 10, 15, or 20 years – it’s your choice.
Liquidity : You can easily sell your bonds any time before maturity.
Safe investment option : You can be sure of receiving the promised regular interest.
Tax-exempted : You are not required to pay any taxes on the interest you earn.
Demat account is optional : You can hold these bonds in physical form, too.
Amount invested (10 Years)
Rate of interest per year
Total amount of interest per year
Interest received annually
Rs.1,00,000
7.5%
Rs. 7,500
Rs. 7,500
Who is eligible to invest in tax-free bonds?
Retail Individual Investors (RIIs) - Including members of Hindu undivided family (HUF) and Non-Resident Indians (NRIs).
High Net-worth Individuals (HNIs) - who have a low-risk appetite and can invest up to Rs. 10 lakhs.
Qualified Institutional Buyers (QIBs) - who have been defined under the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000.
