This entry is part 6 of 9 in the series Tax Free Bond -2015-16

Tax free bonds are those bonds issued for long term, for investment horizon of 10 to 20 years, in which interest earned is exempt from tax.  Tax free bonds do not provide any benefit of tax savings but only interest earned on these bonds is tax exempt.

tax free bond 2015-16It’s not only the higher post-tax returns that are attracting investors to these tax free bonds. These tax free bonds are issued by the government-backed companies that guarantees safety of capital.

All data collected for my personal use. I am not responsible for any mistake in this post. If any correction & addition in this post, Comment your suggestion..

Basic

Central Board of Direct Taxes (CBDT) vide Notification dated 6th July 2015 authorises the entiites mentioned in table below, to issue, during financial year 2015-16, Tax Free, secured, redeemable, non-convertible bonds, aggregating to Rs. 40,000 crore.

Eligibility: The following shall be eligible to subscribe to the bonds:-

(a) Retail Individual Investors (RIIs); (Limit upto 10 lakhs)

(b) Qualified Institutional Buyers (QIBs);

(c) Corporates : including statutory corporations, trusts, partnership firms, limited liability partnerships, cooperative banks, regional rural banks and other legal entities, subject to compliance with their respective applicable legislations; and

(d) High Net worth Individuals (HNIs). (Above 10 lakhs)

Rate of interest:

1. There shall be a ceiling on the coupon rates based on the reference Government security (G-sec) rate.

2. The reference G-sec rate shall be the average of the base yield of G-sec for equivalent maturity reported by Fixed Income Money Market and Derivative Association of India (FIMMDA) on a daily basis (working day) prevailing for two weeks ending on Friday immediately preceding the filing of the final prospectus with the Exchange or Registrar of Companies (ROC) in case of public issue and the issue opening date in case of private placement.

3. The ceiling coupon rate for AAA rated issuers shall be the reference G-sec rate less 55 basis points in case of RIIs and reference G-sec rate less 80 basis points in case of other investor segments referred to at (b),(c) and (d) of paragraph 1 above.

 4. In case the rating of the issuer entity is AA+, the ceiling rate shall be 10 basis points above the ceiling rate for AAA rated entities as given in clause(3) .

 5.  In case  the  rating of the  issuer entity  is AA or AA-, the  ceiling  rate  shall  be 20  basis points above  the  ceiling  rate  for AAA rated  entities as  given in clause(3).

6. These ceiling rates shall apply for annual payment of interest and in case the schedule of interest payment is altered to semi-annual, the interest rates shall be reduced by 15 basis points.

7. The higher rate of interest, applicable to RIIs, shall not be available in case the bonds are transferred by RIIs to non retail investors.

 Public issue:

1. At least 70 per cent of the aggregate amount of bonds issued by each entity shall be raised through public issue and the same shall not be applicable in case of entities where the aggregate amount of bonds as per column (3) of the table is less than rupees five hundred crore.

2. 40 per cent of such public issue shall be earmarked for RIIs.

Total Issue

Following entities have received approval with the below stated limits for raising out funds through tax free bonds for the financial Year 15-16:
2015/16CodeIssuerAllocated AmtPrivate Issue Public Issue
1NHAINational Highways Authority of India 24,0007,20016,800
2IRFCIndian Railway Finance Corporation Ltd. 6,0001,8004,200
3HUDCOHousing and Urban Development Corporation Ltd.5,0001,5003,500
4IREDAIndian Renewable Energy Development Agency Ltd. 2,0006001,400
5PFCPower Finance Corporation Ltd. 1,000300700
6RECRural Electrification Corporation Ltd1,000300700
7NTPCNTPC Ltd.1,000300700
Total (Figure in Cr.) 40,000 12,00028,000

BALANCE ISSUE FOR SUBSCRIPTION

CodeIssuerPublic IssueSubscribeBalance Issue
1NHAINational Highways Authority of India 16,80010,0006,800
2IRFCIndian Railway Finance Corporation Ltd. 4,5324,532NIL
3HUDCOHousing and Urban Development Corporation Ltd.3,5003,500
4IREDAIndian Renewable Energy Development Agency Ltd. 17161716
5PFCPower Finance Corporation Ltd. 700700NIL
6RECRural Electrification Corporation Ltd700 700NIL
7NTPCNTPC Ltd.700700NIL
Total (Figure in Cr.) 28,648 16,63212,016

Taxation

  • No Tax on Interest Income
  • No TDS Deduction on interest as interest is tax free
  • Interest earned has to be shown as exempt income while filing Income Tax Return ITR
  • If sold within 1 year has to pay short term capital gain at the Normal tax rate
  • Long Term Capital Gain (sale after completion of 1 year)  Tax at 10% without indexation and 20% without indexation
  • You can avoid Long term capital gains by investing under section 54EC. (REC or NHAI Capital Gain Bonds)

Market Price

Tax Free Bond Current Market Price Link

IssuerSeriesBSE Script CodeBSE Link
IssuerSeriesBSE Script CodeBSE Link
IRFCSeries 1 A935566BSE Price
Series 1 B935568BSE Price
Series 2 A935570BSE Price
Series 2 B935572BSE Price
Series 3 A935574BSE Price
Series 3 B935576BSE Price
PFCSeries 1 A935504BSE Price
Series 1 B935506BSE Price
Series 2 A935508BSE Price
Series 2 B935510BSE Price
Series 3 A935512BSE Price
Series 3 B935514BSE Price
NTPCSeries 1 A961900BSE Price
Series 1 B961902BSE Price
Series 2 A961904BSE Price
Series 2 B961906BSE Price
Series 3 A961908BSE Price
Series 3 B961910BSE Price
RECSeries 1 A935538BSE Price
Series 1 B935540BSE Price
Series 2 A935542BSE Price
Series 2 B935544BSE Price
Series 3 A935546BSE Price
Series 3 B935548BSE Price

 

Listing

Tax Free Bond Allotment & Listing Details : ISIN No Script Code, Maturity Date, Maturity Amt, Interest Payment Date

Tax Free Bonds Interest Payment Table

Tax Free BondIndian Railway Finance Corporation - IRFC-Tranche 1
Issue Open8 Dec 2015
Issue Close 10 Dec 2015 (Early Close)
Issue RegistrarKarvy Computershare Private Ltd
Listing ExchangeBSE
Allotment Date21 Dec 2015
Listing Date28 Dec 2015
Interest Payment DateFirst Interest payment 15 Oct 2015 & subsequently on 15 Apr. of every year (Last interest payment along with the redemption amount)
Face Value1000
Circular Ref. NoBSE -20151223-7
Tranche 1Series 1ASeries 1BSeries 2ASeries 2BSeries 3ASeries 3B
Coupon7.07%7.28%7.25%7.32%7.53%7.50%
For Cat. I, II , IIIFor Cat. IVFor Cat. I, II , IIIFor Cat. IVFor Cat. I, II , IIIFor Cat. IV
Period10 Years15 Years20 Years10 Years15 Years20 Years
ISIN NoINE053 F07793 INE053 F07801 INE053 F07819 INE053 F07827INE053 F07835INE053 F07843
BSE Script 935566935568935570935572935574935576
NSE Script
Maturity21 Dec 202521 Dec 203021 Dec 203521 Dec 202521 Dec 203021 Dec 2035

Detail Post link – IRFC Bond

Tax Free Bonds Interest Payment Table

Tax Free Bond 2015-16REC Ltd
Issue Open27 Oct 2015
Issue Close 4 Oct 2015 (early close )
Issue RegistrarKarvy Computershare Pvt Ltd
Listing ExchangeProposed BSE / NSE
Allotment Date
Listing Date
Interest Payment Date each year till the date of maturity
Face Value1000
Circular Ref. NoBSE-

Series 1ASeries 1BSeries 2ASeries 2BSeries 3ASeries 3B
Coupon6.89%7.14%7.09%7.34%7.18%7.43%
For Cat. I, II , IIIFor Cat. IVFor Cat. I, II , IIIFor Cat. IVFor Cat. I, II , IIIFor Cat. IV
Period10 Years10 Years15 Years15 Years20 Years20 Years
ISIN NoINE020 B07JP4INE020 B07JQ2INE020 B07JR0INE020 B07JS8INE020 B07JT6INE020 B07JU4
BSE Script 935538935540935542935544935546935548
NSE Script
Maturity05-Nov-2505-Nov-3005-Nov-3505-Nov-2505-Nov-3005-Nov-35

Detail Post link – REC Bond

PFC TAX FREE BOND 

Tax Free Bonds Interest Payment Table

Tax Free Bond 2015-16Power Finance Corporation Ltd
Issue Open5 Oct 2015
Issue Close 9 Oct 2015 (6 Oct early close )
Issue RegistrarBig Share Service Private Ltd
Listing ExchangeProposed BSE / NSE
Allotment Date17 Oct 2015
Listing Date21 Oct 2015
Interest Payment Date17 Oct each year till the date of maturity
Face Value1000
Circular Ref. NoBSE- 20151020-23

Series 1ASeries 1BSeries 2ASeries 2BSeries 3ASeries 3B
Coupon7.11%7.36%7.27%7.52%7.35%7.60%
For Cat. I, II , IIIFor Cat. IVFor Cat. I, II , IIIFor Cat. IVFor Cat. I, II , IIIFor Cat. IV
Period10 Years10 Years15 Years15 Years20 Years20 Years
ISIN NoINE 134E07539 INE 134E07547INE 134E7554INE 134E07562INE 134E07570INE 134E07588
BSE Script 935504935506935508935510935512935514
NSE Script
Maturity17.10.202517.10.202517.10.203017.10.203017.10.203517.10.2035

Detail Post link – PFC Bond

NTPC TAX FREE BOND 

Tax Free Bonds Interest Payment Table

Tax Free Bond 2015-16NTPC Ltd
Issue Open23 Sep 2015
Issue Close 30 Sep 2015 (early close 24 Sep)
Issue RegistrarKarvy Computershare
Listing ExchangeProposed BSE / NSE
Allotment Date5 Oct 2015
Listing Date08 Oct 2015
Interest Payment Date5 Oct each year till the date of maturity
Face Value1000
Circular Ref. NoNSE/CML/30905 BSE 20151007-2

Series 1ASeries 2ASeries 3ASeries 1BSeries 2BSeries 3B
Coupon7.11%7.28%7.37%7.36%7.53%7.62%
Period10 Years15 Years20 Years10 Years15 Years20 Years
ISIN NoINE 733E07JR2 INE 733E07JS0INE 733E07JT8INE 733E07JU6INE 733E07JV4INE 733E07JW2
BSE Script 961900961902961904961906961908961910
NSE Script
Maturity05.10.202505.10.203005.10.203505.10.202505.10.203005.10.2035

Detail Post link – NTPC Bond

Benefit

Tax Free Bond appeal to investor who are looking for fixed and safe returns keeping the risk level as the same as that of a Bank FD. Tax Free Interest Tax Free Bond scores over a Bank FD since the interest is Tax Free in the hand of investor (TDS not deducted on interest). It is not included in the your total income while filling income tax returns.

Pre Tax Returns are Very Attractive

Safety : Tax Free Bond  are issued by PSUs and come with the high credit rating.

Tradable Listing on stock exchanges, freely tradable on stock exchange.
Retail Preference TFB given higher coupon to retail investor.
Format : Option of holding bonds in ” Demat Form ” as well as ” Physical Form” – easy to handle and monitor.