Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: TDS :: due date for vat payment :: articles on VAT and GST in India :: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT RATES :: Central Excise rule to resale the machines to a new company :: VAT Audit :: cpt :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: ACCOUNTING STANDARD :: form 3cd :: TAX RATES - GOODS TAXABLE @ 4%
Direct Tax »
 How to save tax; amazing tips to make your money stay in your wallet Income tax returns (ITR) filing
 Want to save tax? Here are the best options
 Suggestion For Option To Assessee For Higher And Lower TDS/TCS For Optimization Of Tax Collection And Refunds
 CBDT to conduct nationwide review of tax collection for FY18 today
 Here are a few last-minute tax saving ideas Not planned taxes yet?
 Confessions of a fake CA exposes lacuna in e-filing of tax return
 Greetings from the income tax department
 Scrambling to scrounge proof of tax-saving investment
 5 tips to save your money Do not make this big income tax returns filing mistake
 I-T e-assessment: CBDT notifies new communication scheme
 Which income tax form to use; all you want to know in short and precise manner

Tax-free bonds score in secondary market
April, 29th 2016

As interest rates are expected to move south, many savvy investors are buying tax-free bonds in the secondary market. Some of these an effective yield of over seven per cent or 10 per cent return before tax — an attractive rate for those in the highest income tax bracket.

“We are advising the clients who are looking to make fresh investments in debt to add tax-free bonds in their portfolio. It’s a good time to get into these bonds. With pre-tax returns of around 10 per cent, they are attractive compared to other instruments,” says Sriram Iyer, chief executive officer of Religare Wealth Management. These bonds are liquid and are issued by companies that are not only backed by the government but also have high credit ratings. “The interest rate risk at present is also low as rates are expected to go down further. These factors make them extremely safe to invest,” Iyer says.
Read more from our special coverage on "TAX-FREE BONDS"
Tax-free returns spark Rs 43,500-cr bond chase

ALSO READ: It isn't easy for a debt fund investor
State Bank of India’s 10-year fixed deposit offers seven per cent interest. For those in 30 per cent tax bracket, the effective rate goes down to around five per cent. For a similar tenure, in the past, debt funds have returns between 7.14 per cent and 8.54 per cent before tax. Many of tax-free bonds, including recent issues of National Highways Authority of India (NHAI), have yields at around seven per cent and offer stable returns for a long tenure.

An investor, however, needs to keep in mind that buying bonds from secondary market carries interest rate, credit and market risks. The secondary market for bonds in India is also not well developed. “It’s only recently, after tax-free bond issues, that there’s a rise in interest from individual investors,” says Vikram Dalal, managing director of Synergee Capital Services. Experts say that it’s possible in future, when interest rates start rising, these securities might not remain as liquid. Investors may then need to offload the bonds at a loss. Buyers, therefore, need to be prepared to hold them until maturity. They also need to select the issuer carefully as downgrading the credit profile of the company can affect bond prices.

“These bonds make sense at present if they offer yields at around seven per cent. If their effective yields are below 6.7-6.8 per cent, then investors can look at other options,” says Malhar Majumder. He says that debt mutual funds that invest in short-term papers can give similar post-tax returns if an investor holds them for three years or more.

An individual needs to check and compare the pre-tax as well as post-tax yields from these bonds with other available options. When bond investors mention yield, they usually refer to yield-to-maturity (YTM). YTM shows the total return a person will receive if he holds the bond to maturity, which includes interest payment plus any gain (if you purchased at a discount) or loss (if you purchased at a premium).

ALSO READ: How liquid is your portfolio?

If you don’t want to do it yourself, you can also approach intermediaries or brokers that help investors buy and sell bonds. For a 15-year bond, the charge can be as low as 0.1 per cent or 10 basis points (bps) as commission and for 10-year bond the brokerage is 15 bps.

The minimum investment that brokers would look at is Rs 1 lakh to Rs 2 lakh for each transaction. Before investing, also look at the issue size as it may impact liquidity. NHAI’s Rs 10,000-crore bond issue, for example, has the highest traded volume on stock exchanges. Look at the credit rating of the issuer and finally the tenure of the bond. In recent tax-free bond issues, the retail investment limit was up to Rs 10 lakh, which fetched higher interest rates.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Integrated Software Solutions Integrated Software Development Integrated Software Services Integrated Software Solutions India Integrated Softw

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions