Tax Free Bonds 2023: A Smart Way to Save Tax and Earn Income - Bharat Bonds
Tax Free Bonds 2023: A Smart Way to Save Tax and Earn Income
If you are looking for a safe and lucrative investment option that offers regular income and tax benefits, you might want to consider investing in tax free bonds 2023. These are bonds issued by various public sector undertakings (PSUs) and other government entities to raise funds for infrastructure and social development projects. The interest income from these bonds is exempt from income tax, making them an attractive choice for investors in the higher tax brackets.
What are tax free bonds?
Tax free bonds are debt instruments that pay a fixed or variable interest rate to the investors and are redeemable at maturity. They are issued by entities that have a sovereign or quasi-sovereign guarantee, such as the central or state government, PSUs, municipal corporations, etc. The interest income from these bonds is tax free under Section 10(15) of the Income Tax Act, 1961. However, the capital gains from the sale or transfer of these bonds are taxable as per the applicable tax rules.
Tax free bonds are usually issued for long-term periods, ranging from 10 to 20 years. They are also listed on the stock exchanges, making them liquid and tradable. The interest rate or coupon rate of these bonds depends on various factors, such as the credit rating of the issuer, the prevailing market rates, the demand and supply of the bonds, the inflation rate, and the fiscal situation of the government.
Tax free bonds 2023 offer several benefits to the investors, such as:
- Tax saving: The interest income from these bonds is tax free, which means that the investors do not have to pay any tax on it. This can result in significant tax saving, especially for investors in the higher tax brackets. For example, if an investor in the 30% tax bracket invests Rs 10 lakh in a tax free bond that pays 7% interest, he/she will save Rs 21,000 in tax every year. Over a period of 10 years, the tax saving will amount to Rs 2.1 lakh.
- Regular income: The bonds pay interest every year or half-yearly, depending on the terms and conditions of the issue. This provides a regular and stable source of income for the investors, which can be used to meet their financial goals or expenses.
- Capital appreciation: The bonds are linked to the market value of the issuer and the interest rate movements. If the market value of the issuer increases or the interest rates fall, the market price of the bonds will rise. This will result in capital appreciation for the investors, who can sell their bonds at a higher price than their purchase price. However, the opposite is also true. If the market value of the issuer decreases or the interest rates rise, the market price of the bonds will fall. This will result in capital loss for the investors, who will have to sell their bonds at a lower price than their purchase price.
- Safety and security: The bonds are backed by the sovereign or quasi-sovereign guarantee of the government or the issuer, which means that the principal and interest payments are assured. The bonds also have a high credit rating, indicating a low default risk. The bonds are also regulated by the Securities and Exchange Board of India (SEBI) and are subject to the rules and regulations of the stock exchange. This ensures transparency and accountability for the investors.
You can invest in tax free bonds 2023 through two ways: primary market and secondary market. The primary market is where the bonds are issued for the first time by the issuer. The secondary market is where the bonds are traded after the initial issuance. You can invest in tax free bonds 2023 through the primary market by following these steps:
- Check the list of upcoming tax free bonds 2023 on the websites of the issuers, the stock exchanges, or the financial media. The list will provide information on the name of the issuer, the coupon rate, the issue size, the issue date, the maturity date, the credit rating, etc.
- Choose the tax free bond that suits your investment objective, risk appetite, and tax bracket. Compare the coupon rate, the maturity period, the credit rating, and the tax saving potential of different bonds.
- Apply for the bond online or offline through the designated intermediaries, such as banks, post offices, stock brokers, etc. You will need to have a demat account and a PAN card to apply for the bond. You will also need to fill an application form and submit the required documents and payment.
- Wait for the allotment of the bond, which may take a few days. The allotment will depend on the availability and the oversubscription of the bond. You will receive a confirmation of the allotment and the bond will be credited to your demat account.
- Check the list of available tax free bonds 2023 on the websites of the stock exchanges or the financial media. The list will provide information on the bond name, the symbol, the series, the ISIN, the face value, the coupon rate, the issue date, the maturity date, the credit rating, etc.
- Choose the tax free bond that suits your investment objective, risk appetite, and tax bracket. Compare the market price, the yield, the volume, the value, and the tax saving potential of different bonds.
- Place an order for buying or selling the bond through your stock broker or directly on the stock exchange website. The order can be either a market order or a limit order.
- Pay for the purchase or receive the payment for the sale of the bond through your stock broker or directly through the stock exchange clearing corporation.
- Receive or deliver the bond in your demat account as per the settlement cycle of T+2 days.
If you want to know more about tax free bonds 2023, you can refer to these sources:
- [Tax Free Bonds 2023 | Tax Saving Bonds 2023 | List Of Tax-Free Bonds 2023 - ClearTax](^1^): This article gives an overview of the features and benefits of investing in tax free bonds 2023.
- [Buy Tax Free Bonds in India Online | IndiaBonds](^2^): This website provides a platform to buy and sell tax free bonds in India online.
- [7 of the Best Tax-Free Municipal Bond Funds - U.S. News](^3^): This article provides a list of some of the best tax free municipal bond funds to buy in 2023.
- [Start 2023 With These Tax-Free Dividends (Yielding Up to 9%) - Nasdaq](^4^): This article suggests some tax free dividend funds to invest in 2023.
We hope this blog post has given you some useful information on tax free bonds 2023. If you have any questions or feedback, please feel free to leave a comment below. Happy investing! ЁЯШК
Source: Conversation with Bing, 11/3/2023
(1) Tax Saving Bonds 2023 | List Of Tax-Free Bonds 2023 - ClearTax. https://cleartax.in/s/list-of-tax-free-bonds.
(2) Buy Tax Free Bonds in India Online | IndiaBonds. https://www.indiabonds.com/explore/tax-free-bonds/.
(3) 7 of the Best Tax-Free Municipal Bond Funds - U.S. News. https://money.usnews.com/investing/articles/best-tax-free-municipal-bond-funds.
(4) Start 2023 With These Tax-Free Dividends (Yielding Up to 9%). https://www.nasdaq.com/articles/start-2023-with-these-tax-free-dividends-yielding-up-to-9.
Comments
Post a Comment