8.75% – NHAI tax free bonds – Jan-2014 (Tranche-I)
If you have disappointed with NHB tax free bonds, which got subscribed on the first day of its subscription, you may apply for NHAI tax free bonds now, which comes with 8.75% interest rate per annum which is tax free. I agree that NHB offered an 8.88 % interest rate for a 15 year bond which is high compared to current NHAI tax free bonds. Should you buy National Highway Authority of India (NHAI) tax free bonds of January, 2014? What are the features of NHAI tax free bonds?
About NHAI
National Highway Authority of India engaged in maintenance of Highways across India.
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Features of NHAI Tax Free bonds – January, 2014 (Tranche-I)
- Issue start date: 15-January-2014
- Issue end date: 5-February-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 – 8.52% and 15 years – 8.75%
- 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 NSE and BSE, hence these are liquid investments.
- You can apply in demat form or physical form.
Why to invest?
- NHAI is Govt of India enterprise, hence it is safe to invest.
- Attractive tax free returns up to 8.75% per annum for 15 year tenure bonds. If you are in a high tax bracket of 30%, your pre-tax return works out to be 12.66%. 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 11.02%. Hence these bonds offer good interest rates for such high tax bracket individuals.
- Crisil rated AAA/Stable and BWR have rated AAA to this tax free bond issue.
Why not to invest?
- Comparing to previous tax free bonds issue of NHB the interest rates is low.
Interest rate and post tax returns of various tax slabs are indicated here
| NHAI Tax Free Bonds – Dec-2013/Jan-2014 (Tranche-I) | |||||
|---|---|---|---|---|---|
| Tenure (Years) | Face Value (Rs) | Interest Rate % for retail investors | Effective Yield -30.9% tax bracket individuals | Effective Yield -20.6% tax bracket individuals | Effective Yield -10.3% tax bracket individuals |
| 10 | 1,000 | 8.52% | 12.33% | 10.73% | 9.50% |
| 15 | 1,000 | 8.75% | 12.66% | 11.02% | 9.75% |
NHAI Tax Free bonds Vs NHB tax free bonds
Recently NHB issued tax free bonds, hence it is worth comparing both these bonds.
- Safety: Both of them are Government enterprises, hence these tax free bonds are safe.
- Credit rating: Both are rated as AAA.
- Interest rates: For 10 years bond, NHB offered 8.51% interest and currently NHAI offers 8.52%. Except minor increase, there is no much variance. Similarly for 15 year bond, NHB offered 8.88% whereas currently NHAI offers 8.75%. Hence comparing to NHB, NHAI offers low rate of interest.
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How to apply NHAI Tax free bonds?
Since these are issued through the demat form, you can apply online through your broker where you are maintaining demat account. If you want to apply in physical form, you can go through the instructions given on the NHAI website or by downloading the prospectus. I feel it is better to apply through demat account for easy liquidity.
Download NHAI tax free bonds -January 2014 prospectus
Conclusion: National Highway Authority of India (NHAI) tax free bonds offer 8.75% tax free returns per annum. In case you are in high tax bracket and looking for safe investment options, this is the best investment option to invest your money.
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Suresh
NHAI tax free bonds of January, 2014
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