5 Tax free bonds to invest in 2013 – Issue open now
While the first tranche tax free bonds was issued by IRFC,HUDCO and IIFCL in Jan-13, the second tranche tax free bonds are open now. Some more companies joined in this band wagon of issuing tax free bonds now in 2013. Currently there are 5 companies which are offering tax free bonds in India where investors can invest for long term.
- IRFC Tax free bonds
- HUDCO Tax free bonds
- IIFCL Tax free bonds
- PFC tax free bonds
- REC tax free bonds
1) IRFC tax free bonds
Indian Railway Finance Corporation Ltd , a Govt. of India enterprise is a dedicated financing arm of Ministry of Railways. Its sole objective is to raise money from market and finance Indian Railways. IRFC issuing tax free bonds for 2013. The proposed issue is for Rs 1,000 Crores to retain additional subscription up to Rs 3,513.01 Crores.
Details about IRFC tax free bonds issue
- Date of open: 25-Feb-2013
- Date of closure: 13-Mar-2013
- Face value : Rs 1,000 per bond
- Min subscription: 5 bonds i.e. Rs 5,000 and multiples of 1 bond thereon
- There are 2 series of tax free bonds. Series-1 for 10 years; Series-2 for 15 years
- Interest rates are as follows:
Tenure Interest-Individuals Interest for Banks/HNI’s
10 years 7.38 6.88
15 years 7.54 7.04
- Crisil, ICRA and CARE have rated this issue as AAA which states as high safety regarding timely serving of the financial obligations.
2) HUDCO tax free bonds
HUDCO is a public sector enterprise which provides long term finance for the housing development projects. Housing Urban Development Corporation is proposing to issue tax free bonds for Rs 500 Crores with an option to retain oversubscription up to Rs 2,805 Crores.
Details about HUDCO tax free bonds issue
- Date of open: 21-Feb-2013
- Date of closure: 15-Mar-2013
- Face value : Rs 1,000 per bond
- Min subscription: 5 bonds i.e. Rs 5,000 and multiples of 1 bond thereon
- There are 2 series of tax free bonds. Series-1 for 10 years; Series-2 for 15 years
- Interest rates are as follows:
Tenure Interest-Individuals Interest for Banks/HNI’s
10 years 7.53 7.03
15 years 7.69 7.19
- Crisil and India Ratings and Research Pvt. Ltd have rated this issue as AA+ which states as high safety regarding timely serving of the financial obligations.
3) IIFCL tax free bonds
IIFCL is the government enterprise which is established in 2006 with an objective of providing finance solutions for world class infrastructure in India. India Infrastructure Finance Company Ltd (IIFCL) is proposing to issue tax free bonds for Rs 200 Crores with an option to retain oversubscription up to Rs 6,331 Crores.
Details about current tax free bonds issue
- Date of open: 25-Feb-2013
- Date of closure: 15-Mar-2013
- Face value : Rs 1,000 per bond
- Min subscription: 5 bonds i.e. Rs 5,000
- There are 3 series of tax free bonds. Series-1 for 10 years; Series-2 for 15 years; Series-3 for 20 years.
- Interest rates are as follows:
Tenure Interest-Individuals Interest for Banks/HNI’s
10 years 7.36 6.86
15 years 7.52 7.02
20 years 7.58 7.08
- Crisil and ICRA have rated this issue as AAA which states as high safety of investment.
4) Power Finance Corporation (PFC) tax free bonds
PFC is proposing to issue tax free bonds for Rs 100 Crores with an option to retain oversubscription up to Rs 3,890 Crores.
Details about current tax free bonds issue
- Date of open: 18-Feb-2013
- Date of closure: 15-Mar-2013
- Face value : Rs 1,000 per bond
- Min subscription: 5 bonds i.e. Rs 5,000
- There are 3 series of tax free bonds. Series-1 for 10 years; Series-2 for 15 years
- Interest rates are as follows:
Tenure Interest-Individuals Interest for Banks/HNI’s
10 years 7.38 6.88
15 years 7.54 7.04
- Crisil rated this issue as AAA/Stable while ICRA and CARE have rated this issue as AAA which states as high safety of investment.
5) Rural Electrification Corporation (REC) tax free bonds for 2013
REC is proposing to issue tax free bonds for Rs 100 Crores with an option to retain oversubscription up to Rs 2,482 Crores.
Details about current tax free bonds issue
- Date of open: 25-Feb-2013
- Date of closure: 15-Mar-2013
- Face value : Rs 1,000 per bond
- Min subscription: 5 bonds i.e. Rs 5,000
- There are 3 series of tax free bonds. Series-1 for 10 years; Series-2 for 15 years
- Interest rates are as follows:
Tenure Interest-Individuals Interest for Banks/HNI’s
10 years 7.38 6.88
15 years 7.54 7.04
- Crisil, ICRA and CARE have rated this issue as AAA which states as high safety of investment.
Comparison of these 5 Tax Free Bonds
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Suresh
5 Tax free bonds to invest in 2013
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Hi Suresh, Thanks for such a wonderful information. I would like to invest in these now (June/July). Can I do the same? Also, is there anyway I can buy these bonds without opening the DEMAT account? If yes can you please advice how can I do the same?
Thanks in advance
No. These are traditionally issued during Jan to Mar period. If you want you can buy them n open market like any other stock. But better to invest in that period.
Hi Suresh,
Why all companies will open the issue on bonds at the end of financial year? (i.e Jan, Feb, Mar). If they open the issue on FY starting i.e April, May, June we can save some tax by declaring in IT form. in btw why there is where little period for the offer?
And also what is the difference between TAX FREE BOND and TAX SAVING BOND?
Please clarify my queries
Thanks much
Kishore
Kishore, These are tax free bonds and not tax saving bonds. Tax free bonds are those where there is no tax on the returns. These are good for those who are in higher tax bracket as they need not pay tax on such returns.
Thats a very good synopsis of the available options in tax. Iam very naive in matters bond. so please pardon a very naive question. the interest that is supposed to be paid every year (in oct i think), is it compunded ? for ex if i have 10 bonds (i.e. total face value of 10000), will i get the same 758 (7.58%) every october for 15 years or will it be compunded annually and repaid? i hope i have put the question clearly.
Santosh, both options are available. You can opt the one which suits you. I prefer to go for compounding so that you would get good value after 10, 15 or 20 years and returns are tax free.
Hello Suresh, Does this tax free bonds are superior than fixed deposits for NRI? Please explain.
Since NRIs don't pay tax in either investments.
Advanced Thanks for your insight.
Mani, For any investor, if they invest in FD in India, necessart tax needs to be paid. Tax free bonds are very useful for those in high tax bracket (in India) and want to have good returns as there is no tax in return on these investments.
Dear Suresh,
Is this tax free bonds- similar to last year's infrastructure bonds ? Will it help me to save tax – if i invest upto 20000 as last year? please confirm
Kuntal, These are tax free bonds and not tax saving bonds. Tax free bonds are those where there is no tax on the returns. These are good for those who are in higher tax bracket as they need not pay tax.