Tax-free bonds typically mature between 10 to 20 years.
There is no chance of losing money as tax-free bonds are backed by government securities.
Fixed-income securities are debt instruments that offer a fixed interest income on your investment. These are issued under public undertakings. These are safe investment choices and the interest received is tax-free allowing the investors to increase their corpus. These bonds typically mature between 10 to 20 years and their interest rates are usually lower than the other fixed-income investment options.
There are various options for investment in the market, but every investor’s dream is to get high returns in their investment plan. It takes time to choose the right investment plan but arguably, the most reliable option is to choose fixed-income securities (tax-free bonds).
Benefits to choosing tax-free bonds
The return rates on these bonds are tax-free and the return rate varies from 5.50% to 7.50%. It is a great investment choice for high-net-income individuals if you want to increase your corpus. If you fall in the tax bracket of 20-30 per cent, then you have to pay around Rs 15,000 as a tax on earning an interest of Rs 50,000 annually from your bank deposits. Due to this, your return will be reduced to about Rs 35,000. On the other hand, if you invest this money in tax-free bonds instead of bank deposits, then the entire return from it is yours and that too tax-free. Additionally, tax-free bonds also have low liquidity when compared to other asset types.
Risk involved
There is no chance of losing money as tax-free bonds are backed by government securities. That’s the reason it is one of the safest investment schemes. This is an additional perk to capital protection by the nature of the fixed nature of earnings.
Returns
You can get the highest returns in tax-free bonds that are issued by public sectors like HUDCO N2 where you will get 8.2% return rates. On the other hand, if you invest in the HUDCO N3 series (Housing and Urban Development Corporation), it will give you 8.1%. If you invest in the HUDCO N5 series, you will receive a 7.5% return. If you invest in RECLTD N9 (Rural Electrification Corporation Ltd), you will receive 8.7% whereas, if you invest in NHAI NA (National Highway Authority of India) you will receive 7.6%. You can also invest in NHAIN 2 at 8.3%, NHAI NE at 7.6% PFC N8 at 8.9%.
Tax-free bonds are the best option for investors who don’t want to take too much risk and for those who are looking for a long time investment plan.
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