Tax-Free Bonds: The Overlooked Strategy for Financial Freedom

Tax-free bonds are emerging as a valuable tool for taxpayers with income slightly above ₹1 lakh to potentially reduce their tax liability to zero. These bonds, issued by government entities, offer tax-exempt interest income under Section 10(15) of the Income Tax Act13. With coupon rates typically ranging from 5.50% to 7.50%, they provide an attractive alternative to taxable investments. For those in higher tax brackets, the effective returns can be significantly higher than traditional fixed-income options. While no new tax-free bonds have been issued since 2016, they can still be purchased in the secondary market.

 

Source: The Economic Times