Tax free bonds are the best bet for tax free income in India. With interest rates falling in the economy as a whole, some of these bonds have seen prices rise over and above their original offer price. Nonetheless, they still offer better yields for individuals in the highest tax bracket. Take a look.
Indian Railways Finance Corporation N1 Series
Indian Railways Finance Corporation offers an interest rate of 8 per cent on its tax free bonds. The bonds, which were issued at Rs 1000 are currently trading at Rs 1134.
The next interest due date on these bonds is Oct 2016.
The yields are the best only for those in the highest tax bracket.
HUDCO N2 Bonds
The HUDCO N2 Bonds are good for those in the highest tax bracket. The bonds are offered at an interest rate of 8.2 per cent and the interest is paid every year on March 5. The coupon rates are much better than the Indian Railways one, though the yields have dropped due to a drop in interest rates, as the bond prices have gained.
HUDCO N3 Bonds
The Hudco N3 Bonds are almost similar, though they give a coupon rate of 8.1 per cent only.
The bonds are currently priced at Rs 1107 and the next interest payment date is March 5, 2016.
National Highways Authority Of India
The National Highways Authority of India (NHAI) bonds are priced at Rs 1151 on the NSE. The coupon rate on these bonds is 8.2 per cent. The next interest payment of these bonds would be Oct 1, 2016.
REC N6 Bonds
These are another set of bonds that offer a coupon or interest rate in excess of 8 per cent. Actually, the interest rate is 8.46 per cent.
The next interest payment date is Dec 1, 2016. One of the better bonds in terms of interest and coupon rates.
Indian Railways N7 Series
The Indian Railways N7 series tax free bonds offers an interest rate of 8.23 per cent. Again, a better coupon rate as compared to most tax free bonds. The bonds are currently priced at Rs 1105 on the National Stock Exchange.
National Highways Authority N6 Series
The bonds are traded at Rs 1210, but, they offer a healthy coupon rate of 8.75 per cent. The next interest payment for these bonds is March 2017.