NABARD Tax Free Bonds 2016 – Should you invest?

NABARD Tax Free Bonds 2016 ReviewNABARD Tax Free Bonds 2016 – Should you invest?

NABARD Tax Free Bonds March-2016 would open for subscription today. NABARD Tax Free Bonds 2016 carries 7.64% tax free interest for a 15 year bond. It offers 10 and 15 tax free bonds. NABARD Tax-Free Bonds issue size is Rs 3,500 Crores. Should you invest in NABARD Tax Free Bonds of March 2016? What are the positive factors of NABARD Tax Free Bonds March 2016?

About NABARD Ltd

NABARD is an apex development institution in India, having its headquarters in Mumbai  (Maharashtra). NABARD has a mandate under the NABARD Act to facilitate credit and other facilities for the promotion and development of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas in India with a view to promoting integrated rural development.

Also Read: How your parents can help you to save income tax?

Features of NABARD Tax Free Bonds 2016

  • Issue start date: 9-March-2016
  • Issue end date: 16-March-2016
  • The 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 (For Retail investors of < Rs 10 Lakh investment) – a) 10 Years – 7.29%; b) 15 years – 7.64%
  • Non-Resident Indians (NRI’s) cannot apply for these tax free bonds.
  • Retail investors who are applying above Rs 10 Lakh investment 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. Hence, these are liquid investments, provided there is a buyer in the stock exchange.
  • You can apply for these tax free bonds in physical form and demat form.

Why should you invest in NABARD Tax Free Bonds 2016?

  • NABARD is Govt of India enterprise and it is safe to invest in such bonds.
  • Attractive tax free returns up to 7.64% per annum for a 15 year bond. If you are in a high tax bracket of 30%, your pre-tax return works out to be 11.13%. 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 10.55%. Hence, these bonds offer good interest rates for such high tax bracket individuals.
  • India ratings and CRISIL rated these bonds as AAA.

Why not to invest in NABARD Tax Free Bonds 2016?

  • Last year tax free bonds offered 8%+ tax free interest. Compared to them, interest rates offered for current bonds is very low.
  • There are better investment options like equity mutual funds which can give you 12% to 15% annualised returns if you are able to take risks.
  • Not that good investment option for low income tax bracket individuals.

Also Read: Top Tax Saving Options to invest before financial year closing

How to invest in these NABARD Tax Free Bonds 2016?

These are issued through demat form or physical form. In case of 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 on the start date of opening of subscription of these NABARD Tax Free Bonds of 2016. In case you want to apply in physical form, you can visit Edelweiss Financial Services website and download NABARD Tax Free Bonds Prospectus and application form.

Conclusion: There is a marginal reduction in interest rates compared to HUDCO bonds. High tax bracket individuals can park some money in these bonds to get fixed tax free returns.

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NABARD Tax Free Bonds 2016 Review

Suresh KP


  1. Hi Suresh ,

    Can you please write an article about buying tax free bonds in the open market especially the ones which were released with high interest rates(8%to 9%) couple of years back , is it advantageous to buy those bonds now ?

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