New Tax Free Bonds 2015-16: Features & Benefits

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Tax Saving Plans
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New Tax Free Bonds 2015-16 Features Benefits
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Tax Free Bond is one of the popular investment
option to earn a tax free return. In India, we
have very few investment options offering
tax-free returns. Public provident funds (PPF),
Sukanya Samriddhi Scheme (SSA) and Tax free bonds
are investment options that offer tax-free
return. All other investment instruments
including fixed deposits, NSCs, MIS etc., attract
tax on interest income. After a wait of one
year, Tax free bonds are about to hit the market
again. Finance Ministry has given the mandate to
the seven companies including NHAI, Indian
Railways to raise fund via New Tax-Free Bonds in
the financial year 2015-16. The amount allocated
for tax-free bonds this financial year is 40,000
crore. These funds are expected to offer interest
rate in the range of 7.3-7.5.  The maturity
period of these funds will be 10-15-20 years.
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New Tax-Free Bonds 2015-16 As discussed above
government has given permission to seven
different entities to sell tax-free bonds to
raise capital of 40,000 crores. This fund will be
used for infrastructure-related projects. List of
New Tax free bonds for FY 2015-16 and allocation
details are given below.
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What is Tax Free Bond? Tax free bond is document
security against money borrowing given to issuer
(Government or PSUs). Issuer or borrower is bound
to pay fixed rate of interest (coupon rate)
against this bond till the maturity. Interest
income earned from tax free bond is exempted from
taxation u/s 10 of the Income Tax Act, 1961. Tax
free vs Tax Saving People often get confused and
between Tax free and Tax Saving Plans
terminology. Although both these terminology
sounds similar there is a huge difference between
these two. Tax Saving Tax-saving instrument
means an investment that saves your tax. There is
certain provision made in Income tax that allows
the tax payer to save tax by investing in some
tax saving instruments like ELSS, Tax saving
Fixed Deposit, Life Insurance premium, PPF etc.
An investor can claim tax benefit by investing
under this instrument under section 80C.
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Tax Free    Tax Free instrument means money
earned from this investment is tax fee. No tax is
applicable on this income. This income is not
included while calculating tax on total income.
An example of tax free investment instruments is
PPF, Sukanya Samriddhi Scheme and Tax Free
Bonds. Who can invest in Tax Free Bond? Tax
Free bonds allow investment in three different
category. Details of these categories are given
below. Retail Investor High Net worth Investor
(HNI) NRI Non Residential Indians Qualified
Institutional Buyers Corporates
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How to Invest in Tax Free Bond? You can invest
in tax free bonds when bond issue opens for the
subscription. This issue will be open for the
specific duration. Bond can be purchased in
physical or in demat format. PAN card is
mandatory in order to buy Tax Free bonds. The
maturity period of Tax free bond is 10 years, 15
years or 20 years. In case you are in need of
money in between, you can redeem this bond by
selling them in the secondary market. Finding a
buyer in the secondary market for the bond is
challenging. Interest rate paid by tax free bond
is in the range of 7 -9. This interest is paid
by the issuer at the fixed set of the
interval. Source http//moneyexcel.com/11333/ne
w-tax-free-bonds-2015-16
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