Bonds form the part of "Debt" as an asset class. This implies that the investor has given a loan to the issuing entity, and will be repaid at the end of the tenure as specified.
Tax free bonds have emerged as highly popular investment option among investors due to the taxation benefit that they offer. These bonds, generally issued by government backed entities, are exempt from taxation on the interest income received from such instruments under the Income Tax Act, 1961. However these bonds do not offer any additional taxation benefits under section 80CCF of Income Tax Act, 1961.
Tax-exempt bonds usually pay lower coupons than corporate bonds as they enjoy a better credit rating and the interest received is tax-free, thus after-tax returns work out to be higher for the tax-exempt bond.
Benefits of Investing:
How to Invest:
|Low risk of default, since companies have a better credit rating|
| ||Listing of bonds on various exchanges provides liquidity |
to your investments
| Option of holding bonds in 'Demat Form' makes your investments easy to handle & monitor|
| ||Ratings by agencies like CARE, FITCH, CRISIL, ICRA enables you to assess the quality of instruments|
Public Issue: During the public issue of the bonds, you can invest in them by submitting a physical form furnishing the details as requested. Also, with www.kotaksecurities.com, you can make an investment online & enjoy the ease of investing |
| ||Exchange: Post the public issue; these bonds are listed on NSE or BSE or at times on both. You can invest in these bonds through your Kotak Securities trading account the way you invest in shares. |
Other Tax-Saving Options:
As per the newly introduced Section 80-CCG, RGESS scheme is available only to a "New Retail Investor" on investments in the 'Eligible Securities' and offering tax exemption up to Rs. 25,000.