NHAI Tax Free Bonds Issue

NHAI, a Government of India Enterprise is going to hit the market on 28th December ( in next 2 days ) with a 10,000 Crores issue that has maturities of 10 years and 15 years. It is offering 8.2% tax free interest for 10 years paper and 8.4% interest for 15 years paper. Vow. What else could u ask for. A 10 year GOI paper is going at 8.37% in the gilt market on which you are required to pay full tax at your marginal rate of taxation. Now this Gilt is as risk free as they get for Indians ( of course we are all fried if GOI were to default but hey perish the thought on this glorious Monday morning ).

Safety & Returns: So for slightly higher risk ( paper is secured but still there is no explicity GOI guarantee, we only assume that NHAI will not default), we are being offered these rates which are mouth-watering for most of us since most of us are in 30% tax bracket so on a pre tax basis the yield works out to almost  12% per annum


Liquidity:  Bonds will be listed hence there will be enough liquidity ( some may argue with this point though). But you can get out in case of emergency liquidation though do not compare this with liquidity of  a Bank FD


TDS: no TDS hence better than a Bank FD

Tax Angle:  Since these bonds are going to be listed, they will be treated as long term capital asset which means you can transfer them to your sons, daughters and other relatives that you trust and most likely make a capital loss that you can adjust with your other capital gains.

So go for them in drove and lock in this fantastic investment.

Senior citizens and others whose tax liability is low or zero can give this issue a miss.

Happy Investing





One thought on “NHAI Tax Free Bonds Issue

  1. Pingback: NHAI/PFC vs SBI bonds; Art of Stock Picking « Quest for Value

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