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TAX-FREE BONDS

Though tax-free bonds are a good idea for any investor, they are most suitable for people in the top tax bracket, like high net-worth individuals (HNIs) and senior citizens

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TAX-FREE BONDS

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  1. TAX- FREE BONDS

  2. Howtobuytax-freebondsfromthe secondarymarket? Introduction In the aftermath of IL&FS’s (Infrastructure Leasing & Financial Services)defaultinSeptember2019,many debtinvestors weresurprisedbythenumberofcreditevents,like downgrades and defaults, that continued to plague the Indian bondmarket. As a result, investors in the market started looking for safer options with low volatility to lock in the yields for the long term. Tax-freebonds were exactlywhat they were looking for, and as a result, there has been a resurgence in their popularity in recentyears.

  3. Whataretax-freebonds? Tax-freebondsareakindofgovernmentsecuritythatexemptsinvestorsfrompayingincometaxonthe interestearnedu/s10oftheIncomeTaxActifthebondisheldtillmaturity. Though,capitalgainsmadeuponthesaleoftax-freebondsaretaxable. Additionally, for Tax-free bonds India, tax deducted at the source (TDS) does not apply. Indian tax consultants,however,advisethatinvestorsdeclaretheirinterestincome. Howtobuytax-freebonds? Thelasttimethegovernmentissuedtax-freebondswasinFY2015.Nonewissueshavecomeoutsince then,sotheonlyoptionforinvestorsistobuythesebondsfromthesecondarybondmarket. Inthesecondarymarket,theoptionsavailabletoinvestorsto buythese bondsare: 1.Exchanges IfinvestorshaveanexistingDematandTradingaccount,theycaninvestintax-freebondsonthe exchanges(NSE/BSE),justlike theywouldpurchasea stock. However,ifinvestorsdonothaveaDematandTradingaccount,theycandotheirKYCandopenthese accountsbysubmittinga fewdocuments.

  4. 2.Broker Ifinvestorsdonotwantto buytax-freebondsdirectlyfromexchanges,theycanopt forabroker. Whenoptingforabroker,oneisadvisedtocomparethechargesleviedbythebrokersandtheservices provided. Moreover,investorsneed tobeawareofthecreditqualityand thecouponofferedbythebond. • 3.Onlineplatforms Onemorealternativetobuyingatax-freebondisonlineplatforms.Onlineplatformsprovideeasyaccess toallthebonds,andthebuyingprocessisseamlessandquick. Therearemanyonlineplatformsoutthere,selecttheonethatprovidesthebestdealandservice.One suchonlineplatformisBondsIndia. Toinvestintax-freebondsthroughBondsIndia,clickhere.

  5. Conclusion Thoughtax-freebondsareagoodideaforany investor,theyaremostsuitableforpeoplein the top tax bracket, like high net-worth individuals(HNIs)andseniorcitizens. Tax-freebondsarebestsuitedforindividuals looking for long-term, fixed interest investments and not those who need the moneysoon. Thus,beforeyoubuybonds,consideryour goals,riskappetite,and timehorizon.

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