There have been series of Tax free bonds in last two months from likes of HUDCO, IIFCL, REC and IRFC. Now PFC (Power Finance Corporation) has come out again with its Tax free bonds which would be open for subscription till March 15, 2013.
As for most tax free bonds, these are good for investors in high income tax bracket of 20% and 30%. Today the maximum rate offered by bank fixed deposit is 9%. This translates into a post tax return of 7.2% for 20% tax slab and 6.2% for 30% tax slab. This is lower than PFC’s 10-year and 15-year tax free bonds.
Along with the above, it suits investors who want regular income from interest payment and have low risk profile.
Also Read: How investing in Tax free Bonds in your Wife’s name can save tax?
Power Finance Corporation is a listed Government of India undertaking with 73.72% stake held by the govt. The company provides financing to state electricity boards (SEBs), state generating companies and independent power producers (IPPs) for a range of power-sector activities including generation and distribution.
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