Tax-free bonds are bonds whose interest income is fully exempt from income tax under Section 10(15)(iv)(h) of the Income Tax Act, issued by government-backed entities like NHAI, IRFC, PFC, and REC. No new tax-free bonds have been issued since 2016; existing ones trade on the NSE and BSE secondary market.
Tax-free bonds are issued by government-backed entities like NHAI, IRFC, PFC, REC, HUDCO, and NABARD. The interest earned on these bonds is completely exempt from income tax under Section 10(15)(iv)(h) of the Income Tax Act. While no new tax-free bonds have been issued since 2016, they are available in the secondary market through stock exchanges and bond platforms. For investors in the 30% tax bracket, a 5% tax-free yield equals approximately 7.14% pre-tax return.
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Where these trade
Tax-free bonds aren't currently listed on the OBPP platforms BondDekho tracks. Since no new tax-free bonds have been issued since 2016, they trade on the secondary market — you can buy and sell them on the NSE and BSE through a demat account with a stockbroker.
Read: Tax-Free Bonds GuideFrequently Asked Questions
Are tax-free bonds still available in India?
No new tax-free bonds have been issued since 2015-16. However, existing tax-free bonds are actively traded in the secondary market on NSE and BSE. You can buy them through stock brokers or online bond platforms. The availability and pricing depend on market demand.
How do tax-free bonds compare to taxable bonds across slabs?
The post-tax math favours tax-free bonds for investors in higher tax brackets. For someone in the 30% bracket, a 5% tax-free yield equals approximately 7.14% pre-tax. For someone in the 20% bracket, the equivalent is 6.25%. In lower tax brackets, taxable bonds or FDs may produce higher post-tax returns. Compare on a like-for-like post-tax basis for your specific slab.
What is the typical tenure of tax-free bonds?
Tax-free bonds were originally issued with tenures of 10, 15, or 20 years. Since they were issued between 2011-2016, remaining maturities range from roughly 0-10 years in the secondary market. Interest is paid annually.
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Data is for informational purposes only. BondDekho is not SEBI-registered and does not provide investment advice. Bond yields and ratings are subject to change. Verify details on respective platforms before investing.