Long tenor: These bonds typically have a tenure of 10, 15 and 20 years.
Tax free interest income: When you invest in Tax Free Bonds Tax is exempted on the income earned as interest
Government incorporated entities: The entities issuing these bonds are generally government enterprises which means they are government backed and therefore have close to zero risk of default.
Eligibility criteria: The general eligibility criteria to apply to these bonds are as follows : Retail Individual Investors (RIIs) – this includes both HUFs and NRIs Qualified Institutional Buyers (QIBs) National Highway Authority of India (NHAI) Corporates High Net worth Individuals (HNI) Investors can browse through the detailed explanation on the eligibility by downloading the offer document of issaunces on IndiaBonds.
Lower coupon : Typically, the interest earned/yield on Tax Free Bonds are slightly lower in comparison to other types of bonds. However, the effective returns may be higher since the interest income earned is tax exempt. This would typically appeal, as a useful investment alternative to investors who reside in higher tax brackets of around 20 to 30% and are looking to earn tax saving income.