8.8% IREDA Tax Free bonds – Feb/Mar-2014 (Tranche-I)
IREDA tax free bonds of Tranche-I would hit the market on 17th February, 2014. If you have disappointed with earlier NHB tax free bonds or NHAI tax free bonds, which got subscribed immediately after they are opened for subscription, you can apply for IREDA tax free bonds of 2014 now. This comes with a 8.8 % interest rate, which is tax free income. Should you invest in Indian Renewal Energy Development Agency Limited (IREDA) tax free bonds? What are the features of IREDA tax free bonds of February/March, 2014 of Tranche-I?
Indian Renewal Energy Development Agency Limited is a Govt of India enterprise. It is NBFC company engaged into financing the projects generating energy through renewable sources.
Features of IREDA Tax Free bonds – February/March, 2014 (Tranche-I)
- Issue start date: 17-Feb-2014
- Issue end date: 10-Mar-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 – 8.41%
- 15 years – 8.80%
- 20 years – 8.80%
- Non Resident-Indians are NOT eligible to apply for these bonds.
- Retail 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 every year.
- There is no tax on such tax free 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.
Why to invest?
- IREDA is Govt of India enterprise, hence it is safe to invest.
- Attractive tax free returns up to 8.80% per annum for 15 or 20 year tenure bonds. If you are in a high tax bracket of 30%, your pre-tax return works out to be 12.74%. 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 11.08%. Hence, these bonds offer good interest rates for such high tax bracket individuals.
- Crisil rated AAA/Stable and BWR has rated AAA to this tax free bond issue.
Why not to invest?
- Comparing to previous tax free bonds like NHB which offered 9% tax free interest, the interest rate offered is low. You can try better tax free bonds in the open market. I know I have been saying this for some time. I have already analysed this and our article on Best Tax Free Bonds would be posted by Monday.
How high tax bracket individuals can be benefitted is indicated through below table.
IREDA Tax Free bonds Vs NHB tax free bonds Vs NHAI Tax Free Bonds
- Safety: All are are Government enterprises, hence these tax free bonds are safe.
- Credit rating: All are rated as AAA.
- Interest rates: For 10 years bond, NHB offered 8.51% interest, NHAI offered 8.52%. However currently IREDA offers 8.41%. Hence if you are going with 10 year tenure bond, this bond offers low rate compared to previous bonds. Similarly for 15 year bond, NHB offered 8.88%, NHAI offered 8.75% rate and currently IREDA offers 8.8%. Hence comparing to NHAI, IREDA offers high rate of interest.
How to apply IREDA Tax free bonds?
Since these are issued through the demat form, you can apply online through your broker where you are maintaining demat account. If you want to apply in physical form, you can go through the instructions given on the IREDA website. I feel it is better to apply through demat account for easy liquidity.
Download IREDA Tax Free Bonds Prospectus (Link Would be made available shortly)
Conclusion: Indian Renewal Energy Development Agency (IREDA) tax free bonds offer 8.8% tax free returns per annum for 15 and 20 year bond. In case you are in a high tax bracket and looking for safe investment options, this is one of the best investment options to invest your money.
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IREDA Tax Free bonds – Feb/Mar-2014 (Tranche-I)
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