How and Where to Buy Tax Free Bonds
Many people want to take such tax free bonds, on which they do not have to pay tax on the amount of interest they get. Many people do not have the information about where to go to buy such bonds.
A few years ago, there were many such companies, which used to bring such tax free bonds. Mainly among these were – Indian Railway Finance Corporation Tax Free Bond, HUDCO Tax Free Bond, National Highway Authority of India etc.
What Are the Benefits of Buying Tax Free Bonds?
When you buy tax free bonds, the interest earned on it is tax exempt. Therefore, income tax is not calculated on interest by adding it to income.
This can be understood with an example. If you get more than ten thousand rupees interest on the amount deposited in the bank, then tax is deducted on it by adding the amount of interest to the total income.
The specialty of tax free bonds is that the interest amount is not added to the total income. This means that there is complete tax exemption on the income.
Where to Buy Tax Free Bonds in India?
Tax free bonds can be bought from the trading account in the same way as you buy shares. You can also take it from your online trading account and buy through your broker by calling.
Before buying a bond, get information about its value, rate of interest and book closure date. To do so, you may visit the website, www.nseindia.com. In the box you will see the security you want to buy. Go there and click.
After clicking, you will get all the information related to that security. In this you will get all the information like rate of interest, book closure and its expiry date.
The important thing to note in this is that what is the original price of this bond and what is its rate of interest? If you get a bond of Rs 1100 for a principal amount of Rs 1000, that means the rate of interest on it is 8.1 per cent and your cost is not coming down.
Hence, your bond is priced at Rs.1100, but you will get 8.1% interest on Rs.1000 only, because you are actually taking the bond by paying Rs.1000. Many listed bonds issued by the government are assigned the same rating as AAA.
Generally, their expiry date can be 10, 15 or 20 years from the date of issue of the bond.
So, next time whenever you buy a bond, get all the information in this regard, the most important of which is the price of the bond and the rate of interest on it.
