Tax Free Bond

What Is A Tax-Free Bond?

Tax-free bonds have gained a lot of popularity these days, considering that the fascinating income earned from these bonds is free from taxation. Government enterprises launch these bonds, and there is scarcely a risk of non-payment of interest. Tax-free bonds give fixed rates of interest. The profits from these bonds usually get invested in infrastructure projects.

Tax-free bonds come with an elongated maturity period of 10, 15, and 20 years. The major issuers of tax-free bonds in India are Power Finance Corporation, Indian Railway Finance Corporation, and NHAI, to name a few.

Who Should Invest In Tax-Free Bonds?

Tax-free bonds are an outstanding choice for investors looking for regular income, like senior citizens. Government enterprises typically topic these bonds for a longer tenure, so default risk is very low in these bonds. You are guaranteed a fixed income for a more expanded period, typically ten years or more.

What Benefits Of Tax-Free Bonds?

Tax-free bonds come with a lot of charming benefits. Listed below are the significant benefits proffered by tax-free bonds:

  • Investors can relish tax benefits by investing in tax-free bonds. These bonds are 100% tax-free. The interest income accepted from these bonds is calculated as a part of your comprehensive annual income.
  • You get higher interest rates on your arrayed amount. Tax-free bonds provide good returns on your investments.
  • Interest is remunerated on these bonds annually. It gets directly ascribed to the bank account of the investor.
  • Tax-free bonds deliver steady returns for longer terms, such as 10 and 20 years.