NTPC tax free bonds of December, 2013 – Good for diversification
NTPC tax free bonds would hit the market tomorrow (3-Dec-13). HUDCO Tax free bonds issue started from today (2-Dec-13). While HUDCO tax free bonds offer a 9.01 % interest rate, these tax free bonds from NTPC offer as high as 8.73% tax free returns per annum. In this article, I would indicate about NTPC tax free bonds of December 2013, its features, positive factors and also provide a comparison statement between NTPC bonds vs HUDCO tax free bonds.
NTPC is India's largest power company set-up in 1975 to accelerate power development in India. It is emerging as an ‘Integrated Power Major’, with a significant presence in the entire value chain of power generation business. NTPC ranked 337th in the ‘2012, Forbes Global 2000’ ranking of the World’s largest companies. With a current generating capacity of 41,794 MW, NTPC plans to become a 128,000 MW company by 2032.
Features of NTPC Tax Free Bonds / NCD’s of December 2013
- Issue start date: 3-Dec-2013
- Issue end date: 16-Dec-2013
- Face value of the bond is Rs 1,000.
- Minimum investment – 5 Bonds i.e. Rs 5,000 and in multiple of 1 bond thereof
- Interest rates (Retail investors) and tenure are (< Rs 10 Lakh investment)
- 10 Years – 8.66%
- 15 years – 8.73%
- 20 years – 8.91%
- Non-Resident Indians (NRI’s) can invest in these tax free bonds of NTPC of December, 2013. They can invest on non-repatriation basis only
- Retail + NRI investors who are applying for bonds for above Rs 10 Lakhs would get 0.25% less interest compared to the rates indicated here.
- Non retail investors would get an interest rate of 0.25% lower than the retail investor.
- Interest is paid annually.
- There is no tax on the interest from these bonds, hence no TDS would be deducted.
- These tax free bonds would be listed on BSE and NSE. Hence these are liquid investments.
- You can apply in demat form or physical form.
Below are the Interest rates chart along with pre tax returns for individuals with various tax brackets.
Why do you need to invest?
- NTPC is Govt of India enterprise and it is safe to invest.
- Attractive tax free returns up to 8.91% per annum. If you are in a high tax bracket of 30%, your pre-tax return works out to be 12.89%. Currently banks are offering 9% interest rates (pre-tax). Similarly if you are in the 20 % tax bracket, your pre-tax return works out to be 11.22%. Hence these bonds offer good interest rates for such high tax bracket individuals.
- Crisil and ICRA has rated “AAA” to this tax free bond issue.
Why not to invest?
- Currently HUDCO tax free bonds offer high interest rates compared to this tax free bond.
- There are a few tax free bonds which are available in the secondary market at discounted price where you can look them for alternative investment option.
NTPC Tax free bonds Vs HUDCO tax free bonds
Currently HUDCO tax free bonds also opened for subscription and hence it is important for us to compare both of them before taking investment decisions.
- Safety: Both are public enterprises, hence both these tax free bonds are safe.
- Credit rating: Though both are Govt enterprises and secure in nature, NTPC tax free NCD bonds have been rated as AAA and HUDCO have been rated AA+.
- NRI's: HUDCO tax free bonds offer repatriation and non-repatriation benefits for NRI's. However NTPC tax free bonds offer only repatriation. In case they want to convert the money to home country currency, they cannot do by investing in NTPC tax free bonds at maturity / withdrawal.
- Interest rates: HUDCO tax free bonds score high as it provides high interest rates compared to NTPC tax free bonds
How to apply NTPC Tax free bonds?
Since these are issued through the demat form, you can apply through your broker where you are maintaining demat account. Alternatively if you do not have demat account, you can apply through physical form by downloading the application from ICICI Securities or Axis Bank site etc. or visiting their branches. I feel it is better to apply through demat account for easy liquidity. You can download the prospectus of NTPC tax free bonds here.
Conclusion: NTPC Tax Free bonds of December 2013 provide good long term returns for high tax bracket individuals. However HUDCO tax free bonds offer high interest rates comparing to NTPC bonds. I would recommend for HUDCO tax free bonds instead of NTPC bonds. Alternatively if you think of diversification, you can invest part of your savings in these NTPC bonds.
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NTPC tax free bonds of December, 2013