All of the tax free bonds ever issued are listed on either the Bombay Stock Exchange or the National Stock Exchange or both. Interest earned on tax free bonds is tax free and is not added to total income, while computing tax. Take a look at 4 tax free bonds that can offer good yields, provided you are able to purchase them at attractive rates.
Tax free yields at around 8.56%
The HUDCO N2 series tax free bonds are currently traded at Rs 1046 and offer a coupon rate of 8.2 per cent per annum. If one buys the bond at the current rate, the yield works to 8.56 per cent tax free. To get more attractive yields at around 9 per cent, it would be interesting to buy the bonds putting a quote of around Rs 1025.
The N2 series from Indian Railways Finance Corporation (IRFC) offers you a coupon rate of 8.1 per cent payable annually. The bonds are currently trading below the initial offer at Rs 991, giving you a yield to maturity of around 8.5 per cent. Interest is payable annually in the month of Oct.
Buy at lower rates for better yields
National Highways Authority of India (NHAI) N1 series is trading at Rs 1020. If you buy the bonds at the current rate the yield works out to 8.39 per cent. This may not be as attractive as some of the newly offered bonds, which offering better coupon rates.
Buy at lower levels
HUDCO N3 series is currently traded at Rs 1050 on the National Stock Exchange and the yield to maturity for the bond is currently around 8.42 per cent. This again may not be the best and to get attractive yields, the purchaser could put a lower quote, which would result in higher yields.