5 tax free bond ideas for high tax paying individuals

Updated: Wednesday, September 11, 2013, 8:41 [IST]

If you are in the 20 or 30 per cent tax bracket, here are a few tax free bond ideas, in which you can get good tax free yields. These bonds are listed on the stock exchanges and could be purchased from the exchanges. The income from these bonds are tax free, which means the interest earned would not be added to the total income for computation of tax. It's important to remember that the yields indicated in the article are indicative and would vary according to the price of the bond.

Attractive yield

The Indian Railway Finance Corporation Bonds (N2) are offering a coupon rate of 8.1%, the interest which is payable on Oct 15 each year. The bonds are currently quoting at Rs 1058, taking their yield to maturity to around 8.29%. The Bonds expire in Feb 2027.

Tax free yield of around 8.46%

The HUDCO Tax Free Bond N3 series is currently trading at Rs 1020 on the National Stock Exchange. The yield to maturity on the bond works to around 8.46% at the current market price. The bond currently attracts a coupon rate of 8.1% and the interest is payable on March 5 each year.

A tax free yield of around 8.39%

The REC TAX Free Bonds N3 is currently trading at Rs 982 and offers a yield to maturity return of around 8.39%.
The Bonds mature in Dec 2022 and the coupon rate on the Bonds is currently 7.22%.

Yield to maturity of around 8.2%

The NHAI NI series is offering a yield of around 8.17% at the current market price of Rs 1079. The Bonds offer an interest rate of 8.20% annually and the interest is payable on Oct 1 every year. The Bonds expire in Jan 2022.

Tax free yields of around 8.34%

The Hudco Tax Free Bonds, N2 series are currently traded around Rs 1029, taking their yields to around 8.34%. The bonds currently offer a coupon rate of 8.2% and the interest is payable March 5 each year. The tax free bonds expire in March 2027.