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Tax free bonds

Tax-free bonds are financial securities issued by the government of India to raise funds for a particular purpose. Read articles on bonds and finance sector at GoldenPi. These articles includes complete information, tips and reviews on bonds in India.

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Tax free bonds

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  1. Tax free bonds - Advantages and disadvantages

  2. Advantages: Interest Tax-exemption Given that the interest on these bonds is not subject to taxes, the rate of interest given on tax-free bonds typically ranges from 5.50% to 9% which is quite appealing. Investing in tax- free bonds at the present yields might earn you upto6% return that is not subject to taxation. AThe interest income from tax-free bonds is completely exempt from taxes. These bonds are exempt from tax deducted at source (TDS), as well. Long-Term Lock-in Period: Zero Default Risk Public sector organizations issue bonds that are exemptfrom taxes. As a result, unlike other bonds, tax-free bondsare exceptionally safe and have no default risk. The lock-in term for tax-free bonds spans from 10 to 20 years or more, making them appropriate for investors with a lengthy investment horizon..

  3. Disadvantages: Can use as collateral Low Liquidity Despite being listed on stock exchanges, tax-free Bonds have a low level of liquidity. Bonds such as sovereign gold bonds and other types Of bonds may be maintained as security for debts. However, banks do not recognise tax-free bonds as loan collateral. As a result, investors are unable to use them as collateral for loans.

  4. THANK YOU To know more, visit: https://goldenpi.com/blog/essentials/what-are-tax-free-bonds/

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