National Housing Bank (NHB) 8.93% Tax Free Bonds – March 2014 Issue

With the current financial year coming closer to an end, the investors, waiting to deploy their cash surplus or maturity proceeds from their other investments into tax free bonds, are currently spoilt for choice. There are as many as five tax free bond issues currently open and the much awaited NHB issue is getting open for subscription tomorrow i.e. March 7.

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HUDCO Tax Free Secured Redeemable Non Convertible Bonds -Tranche III

HIGHLIGHTS OF TAX BENEFITS

  • In exercise of the powers conferred by item (h) of sub-clause (iv) of clause (15) of Section 10 of the Income Tax Act, 1961 (43 of 1961) the Central Government authorizes HUDCO to issue during the FY 2013-14, Tax Free, Secured, Redeemable, Nonconvertible Bonds.
  •  The income by way of interest on these Bonds is fully exempt from Income Tax and shall not form part of Total Income as per provisions under section 10 (15) (iv) (h) of I.T. Act, 1961.
  • There will be no deduction of tax at source from the interest, which accrues to the bondholders in these bonds irrespective of the amount of the interest or the status of the investors.
  • Wealth Tax is not levied on investment in Bond under section 2(ea) of the Wealth-tax Act, 1957
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IRFC – Public Issue of Tax Free Bonds

HIGHLIGHTS OF TAX BENEFITS

  • Interest from these Bonds do not form part of total income as per provisions of Section 10 (15) (iv) (h) of Income Tax Act, 1961 read along with Section 14A (1) of the Income Tax Act.
  • Since the interest Income on these bonds is exempt, no tax deduction at source (“TDS”) is required. However, interest on application money would be liable for TDS as well as tax as per present tax laws.
  • Wealth Tax is not levied on investment in bonds under section 2(ea) of the Wealth-tax Act, 1957

 

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REC – Tax Free Bonds

HIGHLIGHTS OF TAX BENEFITS

  • Interest from these Bonds do not form part of Total Income as per provisions under section 10 (15) (iv) (h) of Income Tax Act, 1961.
  • Since the interest Income on these bonds is exempt from tax, no Tax Deduction at Source is required.
  • Wealth Tax is not levied on investment in Bonds under section 2(ea) of the Wealth-tax Act, 1957.
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IIFCL 8.80% Tax-Free Bonds Tranche III – February 2014 Issue

India Infrastructure Finance Company Limited, commonly known as IIFCL, has launched the third tranche of its tax-free bonds from Monday i.e. February 17.

So, this is the third and most likely the last public issue of tax-free bonds by IIFCL for the current financial year. The company has already raised Rs. 7,176.21 crore through private placements and tranche I and tranche II of its earlier public issues. So, whatever is left over from its authorised limit of Rs. 10,000 crore, IIFCL has set that figure as its target to be raised in this public issue i.e. Rs. 2,823.79 crore.

The issue will remain open for subscription for almost a month to close on March 14. Here are the issue details which might interest you as an investor:

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NHAI Tax Free Bonds

As National Housing Bank (NHB) tax-free bonds issue is about to get launched from Monday, Indian Railways Finance Corporation (IRFC) would also be coming out with its issue from January 6. Like many of the investors, I am also disappointed with the coupon rates IRFC has announced to offer and also with its decision not to offer the 20-year option.

If any of you doesn’t know already, IRFC has decided to offer 8.48% per annum for the 10-year option and 8.65% per annum for the 15-year option. These rates are lower than the rates NHB issue will carry i.e. 8.51% p.a. for 10 years and 8.88% p.a. for 15 years. As both these issues are ‘AAA’ rated and both companies are government organisations, I think people would be more enthusiastic about NHB bonds.

Though at one place in the prospectus the closing date has been mentioned as February 20, 2014, it has been stated as January 20, 2014 at all other places. Looking at the illustrative example it gets clear that it is indeed January 20th.

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IRFC Tax Free Bonds @ 8.65%

As National Housing Bank (NHB) tax-free bonds issue is about to get launched from Monday, Indian Railways Finance Corporation (IRFC) would also be coming out with its issue from January 6. Like many of the investors, I am also disappointed with the coupon rates IRFC has announced to offer and also with its decision not to offer the 20-year option.

If any of you doesn’t know already, IRFC has decided to offer 8.48% per annum for the 10-year option and 8.65% per annum for the 15-year option. These rates are lower than the rates NHB issue will carry i.e. 8.51% p.a. for 10 years and 8.88% p.a. for 15 years. As both these issues are ‘AAA’ rated and both companies are government organisations, I think people would be more enthusiastic about NHB bonds.

Though at one place in the prospectus the closing date has been mentioned as February 20, 2014, it has been stated as January 20, 2014 at all other places. Looking at the illustrative example it gets clear that it is indeed January 20th.

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