Listed tax free bonds: Attractive yields for tax paying individuals

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Apart from the tax free bond offerings that happen from time to time, there are those that have already been listed and could offer attractive yields. Take a look at 4 such tax free bonds, which offer good returns, especially for those in the 20 and 30 per cent tax bracket. All of these companies are government owned entities and the bonds thus offer high safety.

Attractive post tax yields

The HUDCO N2 series tax free bond is currently traded at Rs 1026. The bond offers an interest rate of 8.2 per cent annually and if one buys the bond now, the yield translates to around 8.6 per cent. For those in the 10 per cent tax bracket the pre tax returns work to 9.46 per cent, while for those in the 20 per cent tax bracket it works to more then 10 per cent, while for those in the 30 per cent tax bracket it works to more then 11 per cent.

Extremely safe and secure bonds

Indian Railway Finance Corporation's (IRFC) N2 series is currently trading at Rs 977. The post tax yield translates to around 8.41 per cent. Thus, if you are paying a tax of around 20 per cent or 30 per cent, your yields would be more then 10 per cent and 11 per respectively, making the bonds rather attractive.

Recently issued tax free bonds

The Rural Electrification Corporation's N9 Bond series were issued in Sept. The interest payment date is December 1. The current coupon rate is 8.71 per cent payable annually and the bonds are traded at Rs 1000. So, your yields are likely to remain at 8.71 per cent, given the fact that the bonds are traded at par. Again, for those in the 20 and 30 per cent tax brackets, the yields work to more then 10 and 11 per cent.

Slightly lower returns

National Highways Authority of India N2 series tax free bonds are traded at Rs 1000. With a coupon rate of 8.3 per cent, their yields are not as high as those of other companies. The interest is payable in Oct each year.

Read more about: irfc, hudco, tax free bonds, rec, nhai, coupon rate
Story first published: Wednesday, November 27, 2013, 9:55 [IST]
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