NHB tax free bonds (Tranche-II )-Mar-2014
NHB tax free bonds of Jan-2014 got subscribed on the first day after it opened for subscription and many investors got disappointed. NHB Tranche-II tax free bonds for 2013-14 is going to hit market today. i.e. 7th March, 2014. The interest rates are reduced to 8.93% in this bonds issue. As indicated in my earlier analysis, there are good reasons why you should subscribe for these NHB bonds where you would get tax free income. Currently there are several tax free bond issues open and you might have confused which one to subscribe. I would also give a quick comparison among all these tax free bonds, which are open in Mar-2014.
National Housing Bank (NHB) is a wholly owned subsidiary of Reserve Bank of India. NHB was established on July 9, 1988 under an Act of Parliament viz., the NHB Act to function as a principal agency to promote housing finance institutions at local and regional levels and to provide financial and other support to such institutions
Features of NHB Tax Free bonds – March, 2014 (Tranche-II)
- Issue start date: 7-Mar-2014
- Issue end date: 18-Mar-2014
- Face value of the bond is Rs 5,000.
- Minimum investment – 1 Bond 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 – 8.50%
- 15 years – 8.93%
- 20 years – 8.90%
- 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 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.
NHB tax free bonds of 2013-14 (Tranche-II) – Interest rate comparision for various tax bracket individuals
Why to invest?
- NHB is part of RBI and it is safe to invest.
- Attractive tax free returns up to 8.93% per annum for 15 year bonds. If you are in a high tax bracket of 30%, your pre-tax return works out to be 12.92%. 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 11.25%. If you are in 10% tax bracket, your pre-tax return works out to be 9.96%. Hence these bonds offer good interest rates for all levels of individuals.
- CARE, Crisil and ICRA have rated “AAA” to this tax free bond issue.
- NHB tax free bonds of Jan-2014 are listed on stock exchange and trading at premium price. There is no doubt that even current bonds may get listed at premium.
Why not to invest?
NHB Tax free bonds Vs other Tax free bonds currently open for subscription
Currently, apart from NHB, there are IFC, REC, IIFCL, HUDCO and Ennore Port bonds are open for subscription. Here is the quick comparison list.
- Tenure : If you want to invest for 10 year tenure, 15 year or 20 year, you can choose NHB, HUDCO and Ennore which offers high rates.
- Rating: If you want to invest in highly rated bonds, you can choose NHB, IRFC, REC and IIFCL.
- Which are good to invest: If you are resident investor, invest in NHB as it offers highest rating along with higher returns. If you are NRI, you can invest in HUDCO which allows you to invest for this bond issue and get higher rate.
How to apply NHB Tax free bonds?
You need to subscribe through your demat account or download the application from the website and submit a manual application.
Conclusion: NHB tax free bonds of Mar-2014 offer 8.93% tax free returns and it is highly rated. I do not know whether any of the tax free bonds that would be issued in future would still give higher rated compared to what is being offered by NHB bonds. Considering the highest interest rate and safety, I feel investors should invest in these bonds to get best returns in India.
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NHB tax free bonds (Tranche-II )-Mar-2014