Point to consider before investing in tax-free bonds.
CREDIT RATING
Credit rating of the bond issue signifies the borrower's credit quality in terms of ability to repay principal along with interest. Lower the rating, higher the interest rate. However, it is advisable to buy tax-free bonds which have good credit rating. In most cases, the credit rating will be the highest grade, i.e. AAA.
COUPON RATE
The rate of interest offered by the issuer of the bond is an important factor. The coupon rate of these bonds is benchmarked against the government securities (G-Sec) of equal maturity. While most tax free bonds issued in 2012 and 2013 carried a coupon of around 8.5-9%, the rate will be lower this time around due to softening of benchmark interest rates since then.
TENURE
The tenure of bonds shall be for 10, 15 and 20 years. Typically, higher the bond tenure, higher the coupon on the bond. But it is important that the investor chooses the bond tenure aligned to his or her investing time horizon.
INTEREST PAYOUT
This is the date when the issuer will pay the interest on the bond every year. If you are investing in several bonds to generate a regular flow of income, identify bonds with payout date spread over the entire year.
Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015
1.ICICI Prudential Tax Plan
2.Reliance Tax Saver (ELSS) Fund
3.HDFC TaxSaver
4.DSP BlackRock Tax Saver Fund
5.Religare Tax Plan
6.Franklin India TaxShield
7.Canara Robeco Equity Tax Saver
8.IDFC Tax Advantage (ELSS) Fund
9.Axis Tax Saver Fund
10.BNP Paribas Long Term Equity Fund
You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds
Invest in Tax Saver Mutual Funds Online -
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
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