HUDCO Tax Free Bonds, NCD's-Dec-2013-Good to invest
HUDCO Tax free bonds / Non Convertible Debenture (NCD) would hit the market on Monday i.e. 2-Dec-2013. Current HUDCO tax free bonds public issue is Tranche-II for Rs 500 Crores and to retain over subscription up to Rs 2,439.19 Crores. Sep-13 issue of HUDCO tax free bonds offered high interest rate of 8.76% for 15 years. However current issue offers 9.01% tax free returns for 20 years. In this article, I would indicate about its features and positive factors of HUDCO Tax free bonds.
Housing Development Corporation Ltd (HUDCO) is a public sector company. HUDCO provides long term finance for construction of houses for residential purposes or finance or undertake housing and urban development plans in the nation.
Features of HUDCO Tax Free Bonds (Tranche-II) Dec-13 / Jan-2014
- Issue start date: 2-Dec-2013
- Issue end date: 10-Jan-2014
- 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 – 8.76%
- 15 years – 8.83%
- 20 years – 9.01%
- Non-Resident Indians (NRI’s) can invest in these HUDCO Tax free bonds of December, 2013 / January, 2014 Tranche-II issue. They can invest on repatriation or non-repatriation basis.
- 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. This is called as Category-III.
- Non retail investors would get an interest rate of 0.25% lower than the retail investor.
- HUDCO tax free bonds 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. 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?
- HUDCO is owned by Govt of India and it is safe to invest.
- Attractive tax free returns up to 9.01%. If you are in high tax bracket of 30%, your pre-tax return works out to be 13.04%. Currently banks are offering 9% interest rates (pre-tax). Similarly if you are in 20% tax bracket, your pre-tax return works out to be 11.35%. Hence these bonds offer good interest rates for such high tax bracket individuals.
- CARE has rated “CARE AA+” to this tax free bond issue. IRRPL rated these bonds as “IND AA+”.
Interest rates during previous tax free bond issues of HUDCO
- Last issue (Feb/Mar-13) from HUDCO tax free bonds had interest rates of 7.8%.
- September-2013 Tranche-I issue interest rates were 8.76%.
- Current issue offers tax free interest of 9.01% which is good to invest
Why not to invest?
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.
How to apply?
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 HDFC Bank 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 HUDCO tax free bonds prospectus here
Conclusion: HUDCO Tax Free bonds provides good long term returns for for high tax bracket individuals. You can put some of your savings in such schemes on an ongoing basis as part of diversification. Treat this as one of the best investment options.
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HUDCO Tax Free Bonds, NCD's-December-2013