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   Tax Free Bonds

 
Tax Free 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. These bonds are generally issued by Government Backed entities and thus have very low default risk.
Other general features are:
  • These bonds can be applied in Physical or Dematerialised mode
  • These bonds generally come with long tenures of 10, 15 and/or 20 years, however, these bonds can be traded on the listed exchange if applied in demat mode
  • There is no Cap on investment made in these bonds
  • Retail Individual Investors get higher interest rates, so for an Individual, HUF to be eligible for higher rates the maximum investment amount is Rs.10 Lakhs
  • The interest offered is benchmarked to the Government security of similar maturity, subject to conditions laid down by CBDT.
  • These bonds however, do not provide any additional tax benefits
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