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Tax Free Bonds NHAI – How to Buy NHAI Bonds? | Tax Benefit | Features

Tax Free Bonds NHAI

What are Tax Free Bonds NHAI?

Indian Bonds are a kind of debt instrument. By investing in this type of asset, the investor(s) gives a loan to the issuing entity. The investor(s) will be repaid at the end of the tenure.
There are different kinds of bonds in India. Those bonds which are exempt from taxation on the interest income under the IT Act, 1961 are called tax-free bonds. These are usually issued by government-backed entities like NHAI i.e. National Highway Authority of India.
Tax Free Bonds NHAI come with a lock-in period of 10-20 years and are non-transferable. These bonds offer an interest rate of 5.50 to 6.50 per cent per annum, payable annually.

Features

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Rating AgencyCRISIL AAA/Stable by CRISIL.
[ICRA] AAA by ICRA.
CARE AAA by CARE.
IND AAA by India Rating & Research Private Limited
Name of the RegistrarKarvy Computershare Private Limited
Lead ManagersSBI Capital Markets Limited, A.K. Capital Services Limited, Axis Capital Limited, Edelweiss Financial Services Limited, ICICI Securities Limited
Investment throughOnline or Offline.
Mode of HoldingPhysical or Dematerialized mode
PriceINR 1,000/-
Face ValueINR 1,000/-
Investment Limit 5 bonds ( INR 5,000/-), individually or collectively across all Series of Bonds and in
multiples of 1 Bond ( INR 1,000/-) thereafter.
TransferabilityNon-transferable and Non-negotiable
Loan facilityNo
Lock in Period10 to 20 years.
Interest paymentThe interest will be paid annually on a fixed date. However, there is NO cumulative option.
Coupon Rate 5.50% to 6.50%.
Tax BenefitInterest earned would be tax free. Tax free status of interest income is as per Section 10(15)(iv)(h) of the Income Tax Act, 1961.
There is no tax saving on the amount invested in these bonds. Therefore, section 80C,80CCF, 80D,54EC, etc. are not applicable.
LiquidityThese bonds are not as liquid as debt funds. As these are longer investment bonds, liquidating them may not be easy. Therefore, this cannot be treated as an emergency fund.
However, bondholder can trade these bonds at any time as per the ongoing market rate.
Any profit from the sale of these bonds will be taxed under the Income Tax Act.
TDS Tax deducted at Source does not apply.

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How to Invest in NHAI Tax Free Bonds?

The Government of India in 2015 did the last primary issuance of tax-free and no subsequent new issues have hit the market since then.
Thus, this effectively leaves the investors with the choice of purchasing these bonds from the secondary market only. Therefore are available on NSE/BSE for trading.
For any retail investor having an existing trading /Demat a/c, investor can buy the bond from the exchange like an equity stock on the basis of the availability.

  • Primary Market: When the company issues bonds to the public, the investor can subscribe by applying online or offline.
    You will be required to fill up a revised application form either online or offline and submit appropriate documents along with a cheque or demand draft of the amount you’d like to invest.
    There are more than 20 nationalized banks that can help you invest in these bonds.
    Once invested, you will receive the bond in your BLA i.e. Bond Ledger Account), along with the Certificate of Holding.
  • Exchange: Investor(s) can buy and sell these bonds on the stock market. However, the interest earned on these bonds is tax-free, any capital gain from sale in the secondary market is taxable.
    STCGs(Short-Term Capital Gains) from sale of tax-free bonds on the exchanges are taxed at the normal rate,
    while LTCGs(Long-Term Capital Gains) are taxed at 10 per cent without indexation (i.e. Indexation is a method used by investors to prevent tax loss on investments) and 20 per cent with indexation, whichever is lower.
    By indexing, you adjust the buy price with annual inflation.

Also Read RBI Bonds 2021 or Floating Rate Savings Bonds | Rate of Interest | Online & Offline

Application Form

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  • The PAN no. should be mentioned in the Application Form. A self certified copy of PAN card, Adhar card and certified copy of address proof of 1st Applicant and one cancelled cheque should be submitted along with application form.
  • Applicant’s name, address and application number should be mentioned on the reverse of the Demand Draft/Cheque. Cash, Money Orders or Postal Orders will NOT be accepted.
  • It is advisable that you keeps a photocopy of the application form and mentions his/her mobile number, email ID in the application form.

Compliance Officer

Mr. S.K. Chauhan Manager (Finance & Accounts)
National Highways Authority of India Head Office, G – 5 & 6,
Sector 10 Dwarka,
New Delhi – 110 075
Tel : +91 11 2507 4100/4200,
E-mail : taxfreebonds@nhai.org

Also Read SBI Capital Gain Bonds | 54EC Bonds | Features | Interest Rate 2021 | How to Buy SBI Online?

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