In the last few days, there has been a flurry of Tax Free Bonds issued by various Institutions. A number of people have queried about them.
They are a useless investment option. You might as well put your money in DSOPF/PPF/Provident Fund. The bonds do not give any real return as inflation is so high that one really does not gain anything. For very high earning individuals, trusts etc , it could still be viable to earn a tax free income on a large corpus. For a common investor or salaried person, these bonds are just a bit better than Term Deposits / FDs.
If you are a zero risk taker FD person, you could opt for these bonds as interest on FD is taxable. Or if you are above 60 yrs of age and seeking some comfort in secure instruments.
The AAA-rated tax-free bonds were issued by National Thermal Power Corporation, which offered up to 8.91% returns. It is not just NTPC , HUDCO tax free bonds also received strong response from subscribers. J
Joining the herd can be un-remunerative as it disturbs the asset allocation of the investors. Many a time we have seen people talking about losses in investing world and hence people seek to invest in low risk fixed income instruments such as the ongoing tax-free bonds. Do not redeem money from Mutual Funds/Equity to invest in Bonds.