{"id":8124,"date":"2024-06-17T12:57:57","date_gmt":"2024-06-17T12:57:57","guid":{"rendered":"https:\/\/goldenpi.com\/blog\/?p=8124"},"modified":"2026-02-26T10:58:24","modified_gmt":"2026-02-26T10:58:24","slug":"tax-free-bonds-meaning-features-and-how-to-invest","status":"publish","type":"post","link":"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/","title":{"rendered":"Tax Free Bonds: Meaning, Features, and How to Invest"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Tax implications are crucial for investors. The Income Tax Act of India, 1961, has clear provisions on taxation on all types of investments, including government bonds. Tax can be imposed on the interest as well as the capital gains. Since a noticeable amount of tax can be imposed on the returns on investment, lowering the profit margin, investors often look for investment instruments that can help them save on taxes.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Generally, governmental enterprises or bodies in India offer bonds with zero tax imposition on the accumulated interest. Not to be confused with tax saving bonds, the tax free bonds fall under Section 10 of the Income Tax Act. There are various types of <\/span><b>tax free bonds India<\/b><span style=\"font-weight: 400;\"> with different features. It is important to understand how tax free bonds work to well plan investment portfolios. Read on to learn about the 101 of tax free bonds and how to invest in them!<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_79_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Definition_of_Tax_Free_Bonds\" >Definition of Tax Free Bonds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Common_Types_of_Tax_Free_Bonds\" >Common Types of Tax Free Bonds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Infrastructure_Bonds\" >Infrastructure Bonds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Housing_Bonds\" >Housing Bonds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Power_Bonds\" >Power Bonds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Railway_Bonds\" >Railway Bonds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Public_Sector_Unit_Bonds\" >Public Sector Unit Bonds<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Features_of_Tax_Free_Bonds\" >Features of Tax Free Bonds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Tax_Exemption\" >Tax Exemption<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Tenure\" >Tenure<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Liquidity\" >Liquidity<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Interest_Rate\" >Interest Rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Investment_Cap\" >Investment Cap<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Convertibility\" >Convertibility<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Benefits_of_Tax_Free_Bonds\" >Benefits of Tax Free Bonds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Saving_on_Taxes\" >Saving on Taxes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Less_Risk\" >Less Risk<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Stable_Interest\" >Stable Interest<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Diversification\" >Diversification<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Eligibility_Criteria_Who_Can_and_Who_Should_Invest\" >Eligibility Criteria: Who Can and Who Should Invest<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Tax_Free_Bonds_in_India_for_2024\" >Tax Free Bonds in India for 2024<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Difference_between_Tax_Free_Bonds_and_Tax_Saving_Bonds\" >Difference between Tax Free Bonds and Tax Saving Bonds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#How_to_Redeem_Tax_Free_Bonds\" >How to Redeem Tax Free Bonds?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#On_Maturity\" >On Maturity<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#Before_Maturity\" >Before Maturity<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#How_to_Invest_in_Tax_Free_Bonds_India_GoldenPi_Introduces_Simple_3-Step_Policy\" >How to Invest in Tax Free Bonds India? GoldenPi Introduces Simple 3-Step Policy.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#FAQs_About_Tax_Free_Bonds\" >FAQs About Tax Free Bonds<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#1_What_is_the_interest_rate_on_a_tax-free_bond\" >1. What is the interest rate on a tax-free bond?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#2_What_kind_of_bonds_can_be_tax-free\" >2. What kind of bonds can be tax-free?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#3_Which_government_bonds_are_taxable\" >3. Which government bonds are taxable?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#4_What_is_the_risk_of_tax_free_bonds\" >4. What is the risk of tax free bonds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-32\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#5_Are_tax_free_bonds_only_for_long-term_investment\" >5. Are tax free bonds only for long-term investment?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-33\" href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/tax-free-bonds-meaning-features-and-how-to-invest\/#6_How_to_buy_tax-free_bonds_in_India\" >6. How to buy tax-free bonds in India?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n\n<h2><span class=\"ez-toc-section\" id=\"Definition_of_Tax_Free_Bonds\"><\/span><strong>Definition of Tax Free Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-8135 size-full\" src=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080724\/Definition-of-Tax-Free-Bonds-1.jpg\" alt=\"Definition of Tax Free Bonds\" width=\"1160\" height=\"550\" srcset=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080724\/Definition-of-Tax-Free-Bonds-1.jpg 1160w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080724\/Definition-of-Tax-Free-Bonds-1-300x142.jpg 300w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080724\/Definition-of-Tax-Free-Bonds-1-1024x486.jpg 1024w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080724\/Definition-of-Tax-Free-Bonds-1-768x364.jpg 768w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080724\/Definition-of-Tax-Free-Bonds-1-585x277.jpg 585w\" sizes=\"(max-width: 1160px) 100vw, 1160px\" \/><\/p>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/goldenpi.com\/government-securities\">Government bonds in India<\/a> are often issued with fixed interest rates. Each of these bonds is aimed at financing certain infrastructure or development projects or meeting gaps in revenues. Once the <a href=\"https:\/\/goldenpi.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">bond<\/a> is issued and investors successfully purchase it, they will receive periodic payments of the interest and the principal amount on the date of maturity. The interest accumulation is not subject to any taxation, hence the name, tax free bonds.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Common_Types_of_Tax_Free_Bonds\"><\/span><strong>Common Types of Tax Free Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Different entities can issue tax free bonds for various purposes, based on which the categorization of these bonds is done.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Infrastructure_Bonds\"><\/span><strong>Infrastructure Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Infrastructure companies issue infrastructure bonds to collect funds for projects like airports, roads, and power plants.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Housing_Bonds\"><\/span><strong>Housing Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Government entities, like the National Housing Bank, issue such bonds to collect funds for affordable housing projects.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Power_Bonds\"><\/span><strong>Power Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Power generation companies issue power bonds to collect funds for the maintenance and expansion of power plants.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Railway_Bonds\"><\/span><strong>Railway Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The Indian Railways issue such bonds for the development and maintenance of the railway network<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Public_Sector_Unit_Bonds\"><\/span><strong>Public Sector Unit Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Enterprises where the government has at least 51% ownership, like HUDCO, NHAI, NTPC, REC, and PFC, issue PSU or public sector unit bonds to collect funds for housing, infrastructure, and power projects.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Features_of_Tax_Free_Bonds\"><\/span><strong>Features of Tax Free Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The following features define tax free bonds of India and must be remembered when making investment strategies and setting financial goals.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Tax_Exemption\"><\/span><strong>Tax Exemption<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The key feature of these bonds is their tax exempted nature. TDS is also not applicable. However, it is important to note that any capital gains will be subject to tax and will be taxed as per the Income Tax Act\u2019s provision.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Tenure\"><\/span><strong>Tenure<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The lock-in period for tax free bonds is between 10 to 15 years, and it can go up to 20 years. The extended lock-in period makes them suitable for long-term investment.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Liquidity\"><\/span><strong>Liquidity<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Tax free bonds can be traded in the secondary market. Investors can decide to sell their bond holdings if needed and enjoy good liquidity on their investments.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Interest_Rate\"><\/span><strong>Interest Rate<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The interest rates of these tax free bonds are fixed for the entire duration of the tenure. It stays uninfluenced by the market fluctuations.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Investment_Cap\"><\/span><strong>Investment Cap<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The minimum investment cap for tax free bonds is generally INR 1,000. That said, the highest cap can be into crores, making them ideal for high-net-worth investors.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Convertibility\"><\/span><strong>Convertibility<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Some bonds can be converted into the issuing entity\u2019s equity shares, allowing investors to convert their investments by scoping the market situation. However, the tax free bonds are not convertible.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Benefits_of_Tax_Free_Bonds\"><\/span><strong>Benefits of Tax Free Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/goldenpi.com\/collections\/state-government-guranteed-bonds\" target=\"_blank\" rel=\"noopener noreferrer\">Government bonds<\/a> have become popular among investors in India. Tax free bonds offer the commonly expected benefits along with something additional!<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Saving_on_Taxes\"><\/span><strong>Saving on Taxes<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">As the payable tax amount on interest rate is zero, the returns remain as expected without any deduction, allowing better capital growth.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Less_Risk\"><\/span><strong>Less Risk<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/goldenpi.com\/collections\/tax-free-bonds\" target=\"_blank\" rel=\"noopener noreferrer\">Tax free bonds<\/a> are backed by the issuing entity, which can be the central government, a state government, or a local government body, like a municipal corporation. The chances of defaulting are almost nil for the central government. Furthermore, state governments and municipal corporations are bound by RBI and SEBI guidelines, making them less riskier borrowers.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Stable_Interest\"><\/span><strong>Stable Interest<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The fixed interest rates indicate an interest accumulation at a stable rate and steady payouts on an annual or semi-annually basis.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Diversification\"><\/span><strong>Diversification<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Besides aiding in maximizing returns, tax free bonds can diversify the portfolio to a great extent.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Eligibility_Criteria_Who_Can_and_Who_Should_Invest\"><\/span><strong>Eligibility Criteria: Who Can and Who Should Invest<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-8136 size-full\" src=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080746\/Eligibility-Criteria-Who-Can-and-Who-Should-Invest.jpg\" alt=\"Eligibility Criteria: Who Can and Who Should Invest\" width=\"1160\" height=\"550\" srcset=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080746\/Eligibility-Criteria-Who-Can-and-Who-Should-Invest.jpg 1160w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080746\/Eligibility-Criteria-Who-Can-and-Who-Should-Invest-300x142.jpg 300w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080746\/Eligibility-Criteria-Who-Can-and-Who-Should-Invest-1024x486.jpg 1024w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080746\/Eligibility-Criteria-Who-Can-and-Who-Should-Invest-768x364.jpg 768w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080746\/Eligibility-Criteria-Who-Can-and-Who-Should-Invest-585x277.jpg 585w\" sizes=\"(max-width: 1160px) 100vw, 1160px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">The individuals and entities eligible to invest in tax free bonds in India are:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Retail Individual Investors, including HUFs and NRIs<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Corporates<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Qualified Institutional Buyers or QIBs<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">National Highway Authority of India or NHAI<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">After thoroughly analyzing the question, \u2018<\/span><b>What are tax free bonds in India<\/b><span style=\"font-weight: 400;\">?\u2019, the following can be considered best suitable to invest:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Those willing to save on taxes<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Senior citizens and others looking for a steady income source<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Those searching for long-term investment tools<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Those with low-risk tolerance<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Investors with high net worth and falling under high tax brackets<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Tax_Free_Bonds_in_India_for_2024\"><\/span><strong>Tax Free Bonds in India for 2024<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Below is a <\/span><b>list of tax free bonds in India<\/b><span style=\"font-weight: 400;\"> with their interest rates, tenures, and other details.<\/span><\/p>\n<div id=\"footable_parent_8130\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <div class=\"pcrstb-wrap\"><table data-ninja_table_instance=\"ninja_table_instance_2\" data-footable_id=\"8130\" data-filter-delay=\"1000\" aria-label=\"Tax Free Bonds_ Meaning, Features, and How to Invest - Table1.csv\"            id=\"footable_8130\"\n           data-unique_identifier=\"ninja_table_unique_id_665263861_8130\"\n           class=\" foo-table ninja_footable foo_table_8130 ninja_table_unique_id_665263861_8130 ui table  nt_type_legacy_table fixed selectable celled striped vertical_centered  footable-paging-right ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                            <col class=\"ninja_column_3 \">\n                            <col class=\"ninja_column_4 \">\n                            <col class=\"ninja_column_5 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_bondissuer \">Bond Issuer<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_type \">Type<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_interestrate \">Interest Rate<\/th><th scope=\"col\"  class=\"ninja_column_3 ninja_clmn_nm_payments \">Payments<\/th><th scope=\"col\"  class=\"ninja_column_4 ninja_clmn_nm_maturitydate \">Maturity Date<\/th><th scope=\"col\"  class=\"ninja_column_5 ninja_clmn_nm_creditratingbycare \">Credit Rating (by CARE)<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"354\" class=\"ninja_table_row_0 nt_row_id_354\">\n            <td>Housing and Urban Development Corporation<\/td><td>PSU<\/td><td>5.08%<\/td><td>Yearly<\/td><td>February 8, 2031<\/td><td>AAA<\/td>        <\/tr>\n            <tr data-row_id=\"355\" class=\"ninja_table_row_1 nt_row_id_355\">\n            <td>National Highway Authority of India<\/td><td>PSU<\/td><td>5.07%<\/td><td>Yearly<\/td><td>January 11, 2031<\/td><td>AAA<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table><\/div>\n    \n    \n    \n<\/div>\n\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Difference_between_Tax_Free_Bonds_and_Tax_Saving_Bonds\"><\/span><strong>Difference between Tax Free Bonds and Tax Saving Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Since tax free and tax saving bonds often come together in discussions, a comparison will allow investors to select the best options.<\/span><\/p>\n<div id=\"footable_parent_8131\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                <div class=\"pcrstb-wrap\"><table data-ninja_table_instance=\"ninja_table_instance_3\" data-footable_id=\"8131\" data-filter-delay=\"1000\" aria-label=\"Tax Free Bonds_ Meaning, Features, and How to Invest - table 2.csv\"            id=\"footable_8131\"\n           data-unique_identifier=\"ninja_table_unique_id_2289199500_8131\"\n           class=\" foo-table ninja_footable foo_table_8131 ninja_table_unique_id_2289199500_8131 ui table  nt_type_legacy_table fixed selectable celled striped vertical_centered  footable-paging-right ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                            <col class=\"ninja_column_2 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_parameters \">Parameters<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_taxfreebonds \">Tax Free Bonds<\/th><th scope=\"col\"  class=\"ninja_column_2 ninja_clmn_nm_taxsavingbonds \">Tax Saving Bonds<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"356\" class=\"ninja_table_row_0 nt_row_id_356\">\n            <td>Tax Exemption<\/td><td>Interest income is tax-exempted.<\/td><td>The initial investment is tax-exempted.<\/td>        <\/tr>\n            <tr data-row_id=\"357\" class=\"ninja_table_row_1 nt_row_id_357\">\n            <td>Regulation<\/td><td>These fall under Section 10 of the Income Tax Act of India, 1961.<\/td><td>These fall under Section 80CCF of the Income Tax Act of India, 1961.<\/td>        <\/tr>\n            <tr data-row_id=\"358\" class=\"ninja_table_row_2 nt_row_id_358\">\n            <td>Interest Rate<\/td><td>Interest rates are comparatively higher.<\/td><td>Interest rates offered are comparatively lower.<\/td>        <\/tr>\n            <tr data-row_id=\"359\" class=\"ninja_table_row_3 nt_row_id_359\">\n            <td>Maturity Period<\/td><td>These can range between 10 to 20 years<\/td><td>These are redeemable after 5 or 7 years<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table><\/div>\n    \n    \n    \n<\/div>\n\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_Redeem_Tax_Free_Bonds\"><\/span><strong>How to Redeem Tax Free Bonds?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-8134 size-full\" src=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080721\/How-to-Redeem-Tax-Free-Bonds.jpg\" alt=\"How to Redeem Tax Free Bonds?\" width=\"1160\" height=\"550\" srcset=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080721\/How-to-Redeem-Tax-Free-Bonds.jpg 1160w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080721\/How-to-Redeem-Tax-Free-Bonds-300x142.jpg 300w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080721\/How-to-Redeem-Tax-Free-Bonds-1024x486.jpg 1024w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080721\/How-to-Redeem-Tax-Free-Bonds-768x364.jpg 768w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2024\/06\/25080721\/How-to-Redeem-Tax-Free-Bonds-585x277.jpg 585w\" sizes=\"(max-width: 1160px) 100vw, 1160px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">There are two ways to redeem tax free bonds.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"On_Maturity\"><\/span><strong>On Maturity<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">On the date of maturity, the issuing entity generates the primary investment amount, i.e., the purchase price of the bonds to the bondholder\u2019s account.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you opt for this option, the capital gain tax will be added to your principal investment amount.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Before_Maturity\"><\/span><strong>Before Maturity<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Before the lock-in period ends, the bondholders can trade the bonds with others on the stock exchange. However, the bond issuer cannot repurchase the bonds.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As you explore different avenues for maximizing your investment returns, selling bonds can be a strategic move. If you opt for this option, it indicates you are selling the bond, and there might be a capital gain. In this context, it&#8217;s worth noting that <a href=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/rbi-is-selling-bonds-and-what-does-that-mean\/\" target=\"_blank\" rel=\"noopener noreferrer\">RBI is selling bonds<\/a>, offering a unique opportunity for investors to engage with government securities in the current market.. The capital gains are taxable under Section 112. If the bond is held for less than a year, it will fall under the short-term capital gain category and will be taxed as per individual income tax slab rates. If the bond is held for more than 1 year, it will be charged with long-term capital gain tax at 10%, excluding indexation benefit.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_Invest_in_Tax_Free_Bonds_India_GoldenPi_Introduces_Simple_3-Step_Policy\"><\/span><b>How to Invest in Tax Free Bonds India<\/b><span style=\"font-weight: 400;\">? GoldenPi Introduces Simple 3-Step Policy.<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/goldenpi.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">GoldenPi<\/a> has made bonds and debentures easily accessible to investors. While its database has all the information and latest updates one might require to make the appropriate investment decisions, it further enables investors to invest in 3 quick and simple steps.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Step 1:<\/b><span style=\"font-weight: 400;\"> Complete the KYC. Digital documentation makes it convenient.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Step 2:<\/b><span style=\"font-weight: 400;\"> Select a bond. The availability of the right options on one platform makes evaluation and comparison easy.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Step 3:<\/b><span style=\"font-weight: 400;\"> Make the Payment. Online gateways are available for smooth transactions.<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"FAQs_About_Tax_Free_Bonds\"><\/span><strong>FAQs About Tax Free Bonds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"1_What_is_the_interest_rate_on_a_tax-free_bond\"><\/span><strong>1. What is the interest rate on a tax-free bond?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The interest rates on tax free bonds can vary depending on the bond issuing entity, market rates, and many other factors. For example, the Housing and Urban Development Corporation has issued a <a href=\"https:\/\/goldenpi.com\/collections\/psu-bonds\">PSU bond<\/a> at an interest rate of 5.08%. On the other hand, the National Highway Authority of India is offering 5.07% interest rates for its PSU bond.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"2_What_kind_of_bonds_can_be_tax-free\"><\/span><strong>2. What kind of bonds can be tax-free?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Bonds offered by governments and governmental bodies can be tax free. The interest income is generally tax free, fetching the name. These bonds tend to have fixed interest rates.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"3_Which_government_bonds_are_taxable\"><\/span><strong>3. Which government bonds are taxable?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Several government bonds are tax free, like infrastructure bonds, housing bonds, power bonds, railway bonds, and public sector unit bonds.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"4_What_is_the_risk_of_tax_free_bonds\"><\/span><strong>4. What is the risk of tax free bonds?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Tax free bonds can have inflation risk as the capital stays locked-in for a long time. If inflation occurs during this period, the investment will lose its value as the purchasing power will go down.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"5_Are_tax_free_bonds_only_for_long-term_investment\"><\/span><strong>5. Are tax free bonds only for long-term investment?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Tax free bonds can come in tenures ranging between 10 and 20 years. While you can redeem such a bond before maturity, it will become subject to capital gains tax if you decide to do so. That\u2019s why these are relevant for long-term investment.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"6_How_to_buy_tax-free_bonds_in_India\"><\/span><strong>6. How to buy tax-free bonds in India?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">You can buy tax free bonds on GoldenPi in quick and easy steps. After completing the digital KYC, select a bond and make the payment.<\/span><\/p>\n<p><script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":\"FAQPage\",\"mainEntity\":[{\"@type\":\"Question\",\"name\":\"1. What is the interest rate on a tax-free bond?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"The interest rates on tax free bonds can vary depending on the bond issuing entity, market rates, and many other factors. For example, the Housing and Urban Development Corporation has issued a PSU bond at an interest rate of 5.08%. On the other hand, the National Highway Authority of India is offering 5.07% interest rates for its PSU bond.\"}},{\"@type\":\"Question\",\"name\":\"2. What kind of bonds can be tax-free?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Bonds offered by governments and governmental bodies can be tax free. The interest income is generally tax free, fetching the name. 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The Income Tax Act of India, 1961, has clear provisions on taxation on all types of&hellip;<\/p>\n","protected":false},"author":8,"featured_media":12217,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"categories":[226,245],"tags":[244],"class_list":["post-8124","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fixed-income","category-govt-bonds","tag-tax-free-bonds"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Investing in Tax-Free Bonds in India: Insights from GoldenPi<\/title>\n<meta name=\"description\" content=\"Discover the advantages of tax-free bonds in India with GoldenPi. Learn how to invest, the benefits, and how these bonds can enhance your portfolio with tax-free income. 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