Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
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: ARTICLES ON INPUT TAX CREDIT IN VAT :: TAX RATES - GOODS TAXABLE @ 4% :: VAT Audit :: empanelment :: Central Excise rule to resale the machines to a new company :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: form 3cd :: list of goods taxed at 4% :: VAT RATES :: cpt :: ACCOUNTING STANDARD :: due date for vat payment :: articles on VAT and GST in India :: TDS :: ACCOUNTING STANDARDS
 
 
« General »
 Finance Ministry may hike monetary limit for filing tax appeals
 Compilation of all notifications issued ON
 Banking transaction tax to have cascading effect: NIPFP
 While filing tax in India, NRIs do not have to state overseas income
 Tax ease on cards, some daily use items may become cheaper
 It’s one year of GSTN, too
 SBI home, auto loan interest rates cut, set to be effective from Nov 1
 MNCs will have to furnish extra disclosures from March 2018
 High Court Allows Woman To File Income Tax Returns Without Quoting Aadhaar
 If tax status is no longer NRI, all your income is taxable in India
 Tax Benefits from Different Types of Loans under the Income Tax Act, 1961

Tax-free bonds a safe haven for investors
August, 21st 2013

The season of tax-free bonds is here. With the government allowing state-owned companies to issue tax-free bonds in the first half of the financial year, these will soon be competing with fixed deposits and other debt instruments.

Some of the public undertakings that will be raising funds are IIFC, IRFC, PFC, NHAI, Hudco, REC, NTPC, NHPC, Indian Renewable Energy Development Agency, Airports Authority of India and Cochin Shipyard. Together, these entities are looking to raise Rs 48,000 crore.

This should be good news for investors, since 70 per cent of these bonds are reserved for public issuance. Of this, 40 per cent will be reserved for retail investors. In addition, with both equities and the debt market going through a rough phase, it will give them a safe investment option.

Raghvendra Nath, managing director of Ladderup Wealth Management, says as these are quasi-government bonds, they are safe to invest. And with G-Sec yields at an all-time high, if any company, comes out with a bond issue now, investors can look forward to high yields. “Since the G-Sec is around nine per cent, the yield on tax-free bonds, if issued now, could be around 8.5 per cent,” says Nath.

In comparison, banks are offering eight-nine per cent on fixed deposits (FDs) of one to five years. The five-year bank FDs offer tax exemption under Section 80C. However, the interest income earned on five-year FDs is taxed. In tax-free bonds, the interest income is tax-free but any capital gains on selling the bonds are taxed.

Fixed maturity plans (FMPs) of mutual funds, which give benefit of double inflation indexation, benefit are currently offering around 10-3-10.4 per cent, while a three-year FMP is offering around 9.8 per cent.

What works in favour of such bonds, especially for the risk-averse investor, is that these will be issued for long term (10-20 years), implying they will be earning a decent rate of return for a longer period.

Ashish Shanker, head (investment advisory), Motilal Oswal Private Wealth Management, says investors should definitely consider these tax-free bonds, since they will offer competitive yields.

However, a word of caution: Look at rating. “In the current environment, investors should be very concerned with the rating, because a 10-year period is very long. There have been cases where over long periods, even the best rated instruments have been downgraded,” says Sumeet Vaid of Ffreedom Financial Planners. His advice is to avoid papers, which are rated below ‘AAA’.

These bonds are better suited for investors in the higher-tax bracket, 20 per cent or above, as the yields fetch around 10.5 per cent pre-tax. For those in the 10 per cent tax bracket, corporate fixed deposits with high credit ratings are better options since the return from the tax-free bonds would be around 8.5 per cent, while the corporate FD would give 10-10.5 per cent though they are riskier.

Liquidity is an issue because there isn’t a strong secondary market and you may have to exit at a discount in case of an emergency.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Outsourcing Company Offshore Software Outsourcing Software Outsourcing Company India Offshore Outsourcing Company India Software BPO Software Business Process Outsourcing Software Outsourcing India Offsho

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