Tax free bonds

One can invest in tax free bonds through the Primary as well as the Secondary markets. The investor can claim absolute tax exemption as per section 10 of the Income Tax Act of India, 1961. The returns are low but offer a fixed rate of interest. The government raises money by issuing these bonds for a long duration of 10-15 years as they are primarily invested in infrastructure projects like Power, Roads etc. The bonds can be traded on the stock exchanges also.

Sample of a Tax-Free bond

Issuer Fixed Interest Rate Maturity Date Early Payment Date (if any) Interest Dates Unit size of each bond
Indian railway finance corporation Ltd. AAA rated 8.40% 18-Feb-2029 Secondary Sale 15-April Rs.10 Lacs