NTPC Tax Free Bonds – Sep-2015 – Should you invest?
Its time for Tax Free Bonds of 2015-2016 now. First tax free bonds in this year is from NTPC. NTPC Tax Free Bonds would hit market on 23rd September, 2015. NTPC Ltd Tax Free Bonds carry 7.62% tax free interest for 20 years bond. It offers 10, 15 and 20 year tax free bonds. NTPC bonds issue size is Rs 700 Crores. Should you invest in NTPC Tax Free Bonds of Sep-2015? What are the positive factors of NTPC Tax Free Bonds of September 2015? Are there any hidden or negative factors in these tax free bonds?
About NTPC Ltd
NTPC is a Government company, which was conferred ‘Navaratna’ status by the Government of India in 1997 and upgraded to ‘Maharatna’ status in 2010. NTPC, the largest power producer in India in terms of both installed capacity and generation, with aggregate installed capacity of 44,398 MW (including 38,202 MW through directly owned units and 6,196 MW through Subsidiaries and Joint Ventures) as on March 31, 2015. While NTPCs core business is the generation and sale of electricity in India, the Company is a diversified and integrated player in the power sector, as NTPC is also engaged in various other complementary businesses, seeking to support its core business and to leverage its technical and operational skills as well as its client and knowledge base in India and abroad.
Features of NTPC Tax Free Bonds of September 2015
- Issue start date: 23-Sep-2015
- Issue end date: 30-Sep-2015
- 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 for Retail investors of investment of < Rs 10 Lakh investment are:
- 10 Years – 7.36% interest rates
- 15 years – 7.53% interest rates
- 20 years – 7.62% interest rates
- Non-Resident Indians (NRI’s) can invest in these tax free bonds of NTPC of September, 2015. They can invest on non-repatriation basis only.
- 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.
- 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 the interest from these bonds, hence no TDS would be deducted.
- These tax free bonds would be listed on BSE and NSE. Hence these are liquid investments, provided there is buyer in stock exchanges.
- You can apply for these tax free bonds in demat form only.
Below are the Interest rates chart along with pre tax returns for individuals with various tax brackets.
Why should you invest?
- NTPC is Govt of India enterprise and it is safe to invest in such bonds.
- Attractive tax free returns up to 7.62% per annum for 20 years bond. If you are in a high tax bracket of 30%, your pre-tax return works out to be 11.03%. Currently banks are offering 8% interest rates (pre-tax). Similarly if you are in the 20 % tax bracket, your pre-tax return works out to be 10.9%. Hence these bonds offer good interest rates for such high tax bracket individuals.
- ICRA rated these bonds as ICRA AAA (Stable), CRISIL as AAA and CARE as AAA (Triple A).
Why not to invest?
- Last year tax free bonds offered 8.5%+ tax free interest. Compared to them, interest rates offered for current bonds is very low.
- 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.
- There are better investment options like equity mutual funds which can give you 12% annualised returns if you are able to take some risk and invest for 10 to 20 years period.
How to invest in these NTPC Tax free bonds?
Since these are issued through the demat form, you need to apply through your broker where you are maintaining demat account. Just login to your demat account and under BONDS section you should be able to see a link. Please note that such option would be enabled only on the start date of opening of subscription of these NTPC tax Free Bonds.
Conclusion: Banks are now offering very low interest rates of 8%. If you are in 30% tax bracket, your post tax returns would be 5.6% only. Similary if you are in 20% tax bracket, your post tax returns would be 6.4% only. Hence comparing to them, NTPC tax free bonds which offers 7.62% tax free interest rate for 20 years is good investment bet. If you are long term investor and want to get highest tax free returns along with safety, you should invest in NTPC Tax Free Bonds of Sep-2015.
Readers, are you excited with the interest rates offered by NTPC Ltd Tax Free Bonds of 2015?
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NTPC Tax Free Bonds – Sep-2015