In the financial world parlance, a bond is a type of debt security where the issuer is in debt towards the holder and depending on the terms of the bond, pays an interest to the holder and also repays the principal on maturity. It is a formal contract where the issuer enters into a formal contract with the holder to pay off any borrowed money plus interest at fixed time gaps. It is like a loan.
We deal in different types of bonds that will help you not only earn handsomely from the issuers but also keep your investment safe.
Tax Free Bonds
Tax free bonds are also called municipal bonds that are issued by government entities that are below the state level. These bonds may be issued by cities, redevelopment agencies, school districts, publicly owned airports and seaports, public utility districts and special-purpose districts. These can be short term or long term in duration and the income through interest is exempt from income tax.
Taxable Bonds
Taxable bonds are types of debt securities where the investor has to pay incomes tax on the income. Most of the bonds on offer are taxable bonds where the interest earned is taxable.
Government bonds are issued the government in the countrys currency. There are also sovereign bonds that are issued in foreign currency. These are considered risk free bonds because the government can resort to raising taxes to pay off the bonds on maturity. Some government bonds are also inflation indexed, meaning these bonds protect the holders against inflation.
What are Infrastructure Bonds?
Infra Bonds are debt instruments wherein an investment upto Rs 20,000 is eligible for individual income tax benefits under section 80CCF. This is over and above the normal limit of Rs 1 lakh investments. Most of these bonds have a five-year buy back option with a 10-year tenure.
Considering the tax benefit these bonds offer individuals in a high tax slab a very high interest yield.
Courtesy: http://www.moneycontrol.com/master_your_money/tax/infrastructure_bonds.php?type=infrastructure_bonds
Infrastructure bonds are long term investment bonds issued by any non banking financial company like Industrial Finance Corporation of India or IDF. These companies are an ombudsman borrowing from the investors and lending to the government. These bonds are used to fund government’s infrastructure projects. Thus an individual is directly helping in nation development.
Capital Gains Bonds are instruments which offer tax exemption for transferring gains of long term capital assets. The Investment in these Bonds is to be made within six months from the date of such transfer of capital assets (Land/House Property etc.) for being exempted from Capital Gains Tax under Section 54EC of the Income Tax Act, 1961.