PFC (Power Finance Corporation Ltd), a Navratna company of Government of India is issuing its Tax Free Bond. It would offer coupon rate up to 7.60% for retail investors depending on tenure. You can choose between tenure of 10, 15 and 20 Years. The bond issue would be open for subscription for October 5 to 9, 2015. The post gives the details of the same.
PFC (Power Finance Corporation Ltd) is Government of India Financial institution and can be considered as financial back bone of Indian Power Sector. It provides financial assistance to power projects across India including generation, transmission, distribution and RM&U projects.
Also Read: PPF – A Must Have Investment
The PFC Tax Free Bond offers the following interest rates. The interest would be paid every year.
The table also shows the effective interest rate for different tax slabs. For e.g. To earn post tax 7.36% interest on deposit a person in 30% tax bracket should actually get pre tax return of 10.65%.
As per rules, the interest rate offered on Tax-free bonds are linked to yield on Government Bonds. Companies with AAA rated tax free bonds can offer up to 55 basis points lower to the G-Sec yield to retail investors and 80 basis points lower for other investors.
Tax Free Bonds are suited for people in the tax bracket of 20% or higher who are looking for regular and safe income. In case you do not want regular income you should first exhaust your Rs 1.5 lakhs PPF limit where the returns are 8.7% and tax free. Salaried employees should opt for VPF before looking at tax free bonds. Both the above options have higher returns, tax free and partial exit options after 5/6 years.
Also Read: What is the Maximum Income Tax You can Save for FY 2015-16?
You can also buy Tax free bonds from the secondary market that are listed on stock exchanges. The table below gives the snapshot of the best tax free bonds available in secondary market. You can compare the YTM (last column) to the interest offered on PFC.
The problem is liquidity of bonds. There are very few transactions in a day and you might not be able to buy at fair price. Also you incur brokerage in tune of 0.5% to 1% on these purchases.
Also Read: Highest Interest Rate on Recurring Deposits [comparing 41 banks]
The bonds can be issued both in physical and demat form. For applying through Demat Account, go to the IPO/NCD/Bonds offer tab of your Demat account and fill out relevant details.
You can download the Physical Form from the Edelweiss Financial Services and follow the instructions.
PFC Tax Free Bonds 2015 suits investors who are looking for safe, regular income and are in the higher tax bracket. A few more PSUs are going to issue tax free bonds in coming days. The interest rate is expected to be similar. NTPC Tax Free Bond were subscribed 11 times on the first day itself, so if you want to subscribe these bonds, invest early as these would be grabbed very soon and may close for subscription if it gets fully subscribed before closure date.
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Hi i have invested in the PFC in 2015. how do i get a statement for the same or will i not get anything from PFC directly if invested in demat form through HDFC securities?
If the bonds have been allotted to your you would get an email confirmation for the same and the PFC bonds would be present in the HDFC securities demat account. Please check.