8.91% IIFCL tax free bonds of December, 2013 – Tranche-II

8.91% IIFCL tax free bonds of December, 2013 – Tranche-II

After HUDCO & NTPC Tax free bonds in this month, IIFCL tax free bonds would market today (9-Dec-13). While HUDCO tax free bonds offer a 9.01% interest rate, these tax free bonds from IIFCL offer as high as 8.91% tax free returns per annum which are similar to NTPC tax free bonds. In this article, I would indicate about IIFCL tax free bonds of December 2013, its features, positive factors.


IIFCL, a government enterprise and has come up with tax free bonds. IIFCL tranche-II tax free bonds issue is for Rs 3,000 Crores.

Features of IIFCL Tax Free Bonds / NCD’s of December 2013-Tranche-II

  • Issue start date: 9-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 – 8.66%
  • 15 years – 8.73%
  • 20 years – 8.91%
  • Non-Resident Indians (NRI’s) cannot invest in these tax free bonds of IIFCL of December, 2013.
  • 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.
  • Below are the Interest rates chart along with pre tax returns for individuals with various tax brackets.

Why do you need to invest?

  • IIFCL is Govt of India enterprise and it is safe to invest.
  • Attractive tax free returns up to 8.91% per annum. If you are in a high tax bracket of 30%, your pre-tax return works out to be 12.89%. 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 11.22%. Hence these bonds offer good interest rates for such high tax bracket individuals.
  • CARE, Brick and ICRA has rated “AAA” to this tax free bond issue.

Why not to invest?

  • Currently IIFCL tax free bonds offer high interest rates compared to this tax free bond.
  • 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.
  • RBI is going to have monitery review during 3rd week of December. If another rate hike is there, there are chances that yield may increase.

IIFCL Tax free bonds Vs HUDCO tax free bonds

Currently HUDCO tax free bonds also opened for subscription and hence it is important for us to compare both of them before taking investment decisions.

Safety: Both are public enterprises, hence both these tax free bonds are safe.

Credit rating: Though both are Govt enterprises and secure in nature, IIFCL tax free NCD bonds have been rated as AAA and HUDCO have been rated AA+.

Interest rates: HUDCO tax free bonds score high as it provides high interest rates compared to IIFCL tax free bonds

How to apply IIFCL Tax free bonds?

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 ICICI Securities or Axis Bank site etc. or visiting their branches. I feel it is better to apply through demat account for easy liquidity.

Download IIFCL Tranche-II tax free bonds prospectus here

Conclusion: IIFCL Tax Free bonds of December 2013 provide good long term returns for high tax bracket individuals. However HUDCO tax free bonds offer high interest rates comparing to IIFCL bonds. I would recommend for HUDCO tax free bonds instead of IIFCL bonds. Alternatively if you think of diversification, you can invest part of your savings in these IIFCL bonds.

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IIFCL tax free bonds of December, 2013

Suresh KP


    1. Ashwin If you sell/close after one year here is what it would be 1) You would get 8.91% tax free interest 2) Your bond value may be exactly at Rs 1000, but it could be lower or higher depending on the market price of your bond.

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