Best Tax Free Bonds available in the stock market to invest now-Feb-2014


Best Tax Free Bonds available in stock market-Feb-2014; Tax Free bonds available in stock marketBest Tax Free Bonds available in the stock market to invest now-Feb-2014

When NHB Tax free bonds got subscribed within 1 day of opening, many of us got disappointed. However, all these tax free bonds are listed on BSE or NSE and some of them are trading at lower prices than the bond price. Are there any best tax free bonds in India which are available in open stock market to invest now? I have analyzed a few tax free bonds, which provide good returns in the long run and are tax free and available at either cheap price which can provide you high returns compared to other investment options. This post is based on several requests from readers on various articles stating to write good tax free bonds which can be purchased from stock market.

Also Read: 8.8% – IREDA Tax Free Bonds of Feb/Mar-2014

What parameters I have used these to choose these best tax free bonds in India?

Based on returns:

The returns are based on what you are getting Vs what you have invested. E.g. If a bond price is Rs 1,000 @ coupon rate of 8.83%. If this bond is currently available for Rs 981, your return is not 8.83%, it is 9%. You need not regret that you have not invested in NHB tax free bond as low priced bonds also can provide you similar return.

Rating:

Bonds which are rated AA+ and above are considered here, which indicates highest safety. Though these companies are Govt enterprises, the rating pertains to the company which issued tax free bonds, which indicates the ability of the company to pay principal and interest.

Best Tax Free Bonds available in the stock market to invest now

1) IIFC Tax free bond Code

Bond Name/Code – IIFCL TR2 SR-3A 8.66 22JN34 1K

This bond is CAREAAA / ICRA AAA rated bond and maturity date is 22-Jan-2034. This tax free bond price is Rs 1,000 @ coupon rate of 8.66% is available in the market at cheap rate of Rs 964 per bond. Means if you invest at this price, you can get 8.98% tax free interest. I would explain this with an example. If you buy 10 bonds @ Rs 964, your investment amount is Rs 9,640. However, your tax free returns are 8.66% on Rs 10,000 bond price which comes to Rs 866. Means for your investment of Rs 9,640, you are getting Rs 964 tax free return which comes to 8.98%.

2) HUDCO tax free bond

Bond Name/Code – HUDCO SR-2B TR2 8.83 13JN29 1K

This bond is CAREAA+ / IND AA+ rated bond and maturity date is 13-Jan-29. This tax free bond price is Rs 1,000 @ coupon rate of 8.83% is available in the market at Rs 999 per bond. Means if you invest at this price, you can get 9% tax free interest. If you buy 10 bonds @ Rs 999, your investment amount is Rs 9,990. However, your tax free returns are 8.83% on Rs 10,000 bond price which comes to Rs 883. Means for your investment of Rs 9,990, you are getting Rs 883 tax free return which comes to 8.84%.

3) NHAI N34 series tax free bond


Bond Name/Code – NHAI SR IIB 8.75 05FB29 FV1000

This bond is CAREAAA / ICRA AAA rated bond. This tax free bond price is Rs 1,000 @ coupon rate of 8.75% is available in the market at Rs 995 per bond. Means if you invest at this price, you can get 8.79% tax free interest. If you buy 10 bonds @ Rs 995, your investment amount is Rs 9,950. However, your returns are 8.75% on Rs 10,000 bond price which comes to Rs 875. Means for your investment of Rs 9,950, you are getting Rs 995 tax free return which comes to 8.79%.

4) IRFC tax free bond series tax free bond

Bond Name/Code – IRFC SR 87 6.88% LOA 23MR23

This bond is Crisil AAA / ICRA AAA rated bond. This tax free bond price is Rs 1,000 @ coupon rate of 6.88% is available in the market at cheap rate of Rs 784 per bond. Means if you invest at this price, you can get 6.88% tax free interest. If you buy 10 bonds @ Rs 784, your investment amount is Rs 7,840. However, your returns are 6.88% on Rs 10,000 bond price which comes to Rs 688. Means for your investment of Rs 7,840, you are getting Rs 688 tax free return which comes to 8.77%.

5) NHB tax free bond N34 series tax free bond:

Bond Name/Code – NHB TR1 SR-3B 9.01 13JN34 FV5K

This bond is Crisil AAA / CARE AAA rated bond. This tax free bond price is Rs 5,000 per bond @ coupon rate of 9.01% is available in market at little higher price of Rs 5,178 per bond. Means if you invest at this price, you can get 9.01% tax free interest. If you buy 2 bonds @ Rs 5,178 your investment amount is Rs 10,356. However, your returns are 9.01% on Rs 10,356 bond price which comes to Rs 901. Means for your investment of Rs 10,356, you are getting Rs 901 tax free return which comes to 8.70%.

Quick summary about these 5 bonds

Best Tax Free Bonds available in stock market-Feb-2014; Tax Free bonds available in open stock market

Also Read: Invest in Top Tax Saving FD Schemes for saving tax u/s 80C

What is the risk involved in buying these bonds are discounted prices or at this current market price?

Now the question comes to your mind is whether there is any risk involved. Yes, these bonds are traded on the stock exchange and their bond price can fluctuate based on the demand. Demand is based on the interest rate fluctuations. RBI Repo rate reduction can increase the bond prices. There is no harm if you invest and redeem at maturity. However, if you want to redeem before maturity, you may not get the value at which you purchased. You may need to sell them at lower prices.

Conclusion: You need not regret that you have not purchased good bonds like NHB. The above best tax free bonds can provide good returns in long run, which are tax free. If you are in a high tax bracket and want to make good tax free money, you should invest in above bonds.

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Suresh
Best Tax Free Bonds available in the stock market to invest now


Article by Suresh

Suresh KP i.e. me have written 500+ articles on this blog. I love doing analysis and identifying the Best investment options.

20 Comments

  1. anil says:

    Hi sir, any update on best tax free bonds to invest in Nov / Dec 2014.

    Thanks

  2. anil says:

    Hi suresh very good article, any update on best available tax free bonds now in Nov/ Dec from secondary/ open market. Any news on new IPO of tax free bonds likely end of this FY.

    Thanks in advance

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