Are new Tax Free Bonds being issued?

New Tax Free Bonds have not been issued since FY 2015-16. The existing series continue to trade on the secondary market through exchanges like NSE and BSE. GoldenPi lists what is available at the current time.

What are Section 10 15 bonds?

Section 10(15) bonds" is a common shorthand for this category, since the exemption comes from Section 10(15)(iv)(h) of the Income Tax Act. The section grants tax exemption on interest income from bonds issued by specified entities like NHAI and REC

How is tax exempt interest income reported?

Tax exempt interest income from these bonds should be reported in your ITR under "Exempt Income (Section 10)". The actual tax payable on the interest itself is zero. Capital gains on the same bonds, if any, are taxable.

Tax Free Bonds in India 2026

Q: What are Tax Free Bonds?

Tax Free Bonds are bonds where the annual interest is fully exempt from income tax under Section 10(15)(iv)(h) of the Income Tax Act. They were issued by government-backed entities like NHAI, REC, PFC, IRFC, HUDCO and NABARD primarily between FY 2011-12 and FY 2015-16.

Tax-Free Bonds are fixed income investments that offer interest income exempt from income tax, subject to applicable tax provisions. Issued primarily by government backed

Currently no bond available for this collection

More About Tax Free Bonds in India 2026

Tax Free Bonds are bonds where the interest income is fully exempt from income tax under Section 10(15)(iv)(h) of the Income Tax Act. The issuer pays you a coupon every year, and you keep all of it without paying any tax on the interest.

These bonds were issued by select government-backed entities like NHAI, REC, PFC, IRFC, HUDCO, NABARD, IREDA, NTPC, and NHPC, primarily between FY 2011-12 and FY 2015-16. As of June 2026, no new issues have come out since FY 2015-16, but the older series continue to trade on the secondary market.

What are Tax-Free Bonds?

Tax-Free Bonds are debt instruments that provide interest income exempt from income tax under applicable provisions of the Income-tax Act.

In simple terms, when you invest in an eligible tax-free bond, the issuer pays you interest at a predetermined coupon rate. Unlike regular taxable bonds, this interest is not added to your taxable income.

These bonds were issued by entities notified by the government under Section 10(15)(iv)(h) of the Income-tax Act, 1961. Following the introduction of the Income-tax Act, 2025, the corresponding exemption provisions should be read with the applicable current law. Major names include NHAI (National Highways Authority of India), REC (Rural Electrification Corporation), PFC (Power Finance Corporation), IRFC (Indian Railway Finance Corporation), HUDCO and NABARD, to name a few.

How Does Tax Exemption Work?

The tax benefit of tax-free bonds is simple. When the issuer pays the interest, the entire eligible interest amount is exempt from income tax. No TDS is deducted on this exempt interest income.

Unlike regular taxable bonds, where interest is generally added to your taxable income, the interest earned from eligible tax-free bonds remains tax-exempt.

A Simple Example

Let's understand how tax free bonds work with a simple example.

Suppose you purchase a tax free bond with a face value of ₹1,00,000 and an annual coupon rate of 7.5%.

Here is what your investment would look like:

Face value: ₹1,00,000
Annual coupon rate: 7.5%
Annual interest received: ₹7,500
Interest tax liability: Nil, subject to eligibility

You would receive ₹7,500 as annual interest, without paying income tax on the eligible interest amount.

If you hold the bond until maturity, you will continue receiving interest as per the bond's payment schedule and receive the principal amount at maturity, subject to the terms of the issue and the issuer meeting its obligations.

For investors in higher tax brackets, this tax exemption can make a significant difference to their overall post-tax returns.

For an investor in the 30% income-tax bracket, earning ₹7,000 as tax-free interest is equivalent to earning approximately 10% interest from a regular taxable investment, before considering surcharge and cess.

Important: The tax exemption applies only to eligible interest income. Any capital gains earned by selling the bond in the secondary market are taxable under the applicable tax provisions.

Risks to Understand

Although tax free bonds offer tax exempt interest income, investors should understand the risks associated with them before investing.

1. Liquidity Risk

Not every tax free bond is actively traded in the secondary market. Some bond series may have limited trading volumes, making it difficult to sell them immediately at your preferred price.

2. Interest rate risk

Most of these bonds have long tenures (10 to 20 years from issue). When market interest rates rise, the resale price of the bond falls. This matters if you sell before maturity.

3. Capital gain taxation.

While the interest is exempt, any capital gain on sale is taxable. This affects post-tax returns if you don't hold to maturity.

How to Invest on GoldenPi

You can explore and invest in available Tax-Free Bonds through GoldenPi's online bond investment platform.

Follow these simple steps:

Log in to your KYC verified GoldenPi account.
Navigate to the Tax Free Bonds collection.
Browse the available bonds and compare issuers, coupon rates, yields and maturity dates.
Select the bond that matches your investment preferences.
Review the bond details, current market price and investment requirements.
Complete the payment through the available payment options.

Once the transaction is successfully settled, the bonds are credited to your demat account.

Note: Since fresh tax-free bond issuances have not taken place since FY 2015-16, the bonds available on the platform are existing securities traded in the secondary market. Availability, prices and yields may change depending on market demand and supply.

Understand the Taxation

Taxation is an important factor to consider when investing in tax-free bonds. While the interest income from eligible bonds is exempt from income tax, any capital gains earned from selling them are taxable.

1. Interest Income

Interest earned from qualifying tax-free bonds is exempt from income tax under the applicable provisions. This exemption was originally provided under Section 10(15)(iv)(h) of the Income-tax Act, 1961.

2. Capital Gains

If you sell a tax-free bond in the secondary market at a profit, the gains are taxable.

For listed bonds, the general taxation treatment is:

Short-Term Capital Gains (STCG): Gains from bonds held for 12 months or less are generally taxed according to the applicable income-tax slab.
Long-Term Capital Gains (LTCG): Gains from bonds held for more than 12 months are generally taxed at 12.5% without indexation.

The applicable provisions and tax rates should be checked based on the transaction date and investor's circumstances.

Investors should consult a tax professional for advice on their individual tax liability.

Conclusion

Tax-Free Bonds can be a suitable fixed-income investment option for investors looking to earn regular interest income without paying income tax on eligible coupon payments. Issued by established government-backed organisations and public sector entities, these bonds offer a combination of regular interest payments and defined maturity periods.

Although fresh tax-free bond issues have not been introduced since FY 2015-16, investors can still explore existing NHAI, REC, PFC, IRFC and HUDCO tax-free bonds through the secondary market.

Before investing, it is important to compare the coupon rate, current market price, Yield to Maturity (YTM), remaining tenure and liquidity of the bond.

Explore available Tax-Free Bonds on GoldenPi, compare investment opportunities and make informed fixed-income investment decisions.

GoldenPi provides access to available secondary-market listings, with bond prices, yields and maturity details to help investors evaluate their options.