Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Saturday 24 August 2013

Tax free bonds are good for low risk investor

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

For the risk- averse investor, it is a good long- term instrument. But liquidity could be an issue

 

The season of tax- free bonds is here. With the government allowing state- owned companies to issue tax- free bonds in the first half of the financial year, these will soon be competing with fixed deposits and other debt instruments.

Some of the public undertakings that will be raising funds are IIFC, IRFC, PFC, NHAI, Hudco, REC, NTPC, NHPC, Indian Renewable Energy Development Agency, Airports Authority of India and Cochin Shipyard. Together, these entities are looking to raise 48,000 crore.

This should be good news for investors, since 70 per cent of these bonds are reserved for public issuance. Of this, 40 per cent will be reserved for retail investors. In addition, with both equities and the debt market going through a rough phase, it will give them a safe investment option.

Raghvendra Nath, managing director of Ladderup Wealth Management, says as these are quasi- government bonds, they are safe to invest. And with G- Sec yields at an all- time high, if any company, comes out with a bond issue now, investors can look forward to high yields. Since the G- Sec is around nine per cent, the yield on tax- free bonds, if issued now, could be around 8.5 per cent.

In comparison, banks are offering eight- nine per cent on fixed deposits (FDs) of one to five years. The five- year bank FDs offer tax exemption under Section 80C. However, the interest income earned on five- year FDs is taxed. In tax- free bonds, the interest income is tax- free but any capital gains on selling the bonds are taxed.

Fixed maturity plans ( FMPs) of mutual funds, which give benefit of double inflation indexation, benefit are currently offering around 10- 3- 10.4 per cent, while a three- year FMP is offering around 9.8 per cent.

What works in favour of such bonds, especially for the risk- averse investor, is that these will be issued for long term (10- 20 years), implying they will be earning a decent rate of return for a longer period.

Investors should definitely consider these tax- free bonds, since they will offer competitive yields.

However, a word of caution: Look at rating. In the current environment, investors should be very concerned with the rating, because a 10- year period is very long. There have been cases where over long periods, even the best rated instruments have been downgraded.

These bonds are better suited for investors in the highertax bracket, 20 per cent or above, as the yields fetch around 10.5 per cent pre- tax. For those in the 10 per cent tax bracket, corporate fixed deposits with high credit ratings are better options since the return from the tax- free bonds would be around 8.5 per cent, while the corporate FD would give 10- 10.5 per cent though they are riskier. Liquidity is an issue because there isn't a strong secondary market and you may have to exit at a discount in case of an emergency.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

No comments:

Post a Comment

Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Popular Posts