8.88% REC Tax Free bonds-Tranche-II-March-2014
REC Tax free bonds of Tranche-I was issued in Aug-2013. Now tranche-II of REC bonds are being issued. These REC tax free bonds of Mar-2014 carry 8.88% tax free interest. These REC bonds carry AAA rating from CARE, Crisil, ICRA and IRRPL. These are good to invest.
About Rural Electrification Corporation
Rural Electrification Corporation (REC) Ltd is a Govt. of India enterprise. REC provides loans to state power utilities in rural electrification schemes. REC is planning to mobilize Rs 250 Crores through this issue with an option to retain over subscription up to Rs 809.39 Crores totaling to Rs 1,059 Crores.
Features of REC Tax Free Bonds – Tranche-II-Mar-2014
- Issue start date: 28-Feeb-2014
- Issue end date: 14-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 and tenure are
- 10 Years – 8.44%
- 15 years – 8.88%
- 20 years – 8.86%
- Non retail investors would get an interest rate of 0.25% lower than the retail investor.
- REC bonds interest is paid annually.
- There is no tax on the interest from these bonds, hence no TDS deducted.
- These Tax free bonds would be listed on BSE. Hence, these are liquid investments.
- Non-Resident Indians (NRI’s) can invest in these REC Tax free bonds on repatraion and non-repatriation
- You can apply in demat form or physical form.
- Download REC Tax free Bonds Tranche-II prospectus here
Below are the Interest rates chart along with pre tax returns for individuals with various tax brackets.
Why to invest?
- REC is a Govt.of India enterprise and it is safe to invest.
- Attractive tax free returns up to 8.88%. If you are in a high tax bracket of 30%, your pre-tax return works out to be 12.85%. 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 11.18%. Hence, these bonds offer good interest rates for such high tax bracket individuals.
- CRISIL, CARE, India Ratings and ICRA have been rated AAA for this Tax free bonds Tranche-II issue.
- Last issue (Aug-2013) from REC tax free bonds has interest rates of 8.71%.
Why not to invest?
- No reasons for not to apply
How to apply?
Since these are issued through the demat form, you can apply through your demat account. Alternatively, if you do not have demat account, you can apply through physical form by downloading the application from ICICIdirect.com website. I feel it is better to apply through demat account for easy liquidity.
REC Tax free bonds Tranche-II Vs IRFC Tax free bonds Tranche-II
Both offer 8.88% interest for 15 years tenure. Both are Govt of India enterprise. Credit ratings for both issues are AAA.
Conclusion: There are several tax free bond issues in the last few months. Investing in high yield returns like IRFC or REC bonds would definitely help you to get higher returns if you are in a high tax bracket.
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REC Tax Free bonds-Tranche-II-March-2014