Plan your investment
What Our Plans Cover
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Bonds issued by designated infrast...
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Tax-exempt annual coupon payments
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Return of face value at maturity
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Purchase through the secondary mar...
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Holding in your demat account
Who Can Consider This Plan?
- Indian resident individual, HUF, trust, firm or company
- NRIs, subject to the specific issue permitting NRI investment
- A demat account for holding the securities
- PAN and completed KYC
- Minimum investment as specified in the issue terms
What May Not Be Covered?
- Fresh issues — none have come to market recently
- Exemption on capital gains if you sell before maturity
- Protection against price movement in the secondary market
- Reliable liquidity; these issues trade thinly
Always check the policy wording before you commit.
Why Choose Wealth & Covers?
- Expert advice to choose the right plan
- Plans from leading investments companies
- Hassle-free process and documentation
- End-to-end support, including claim assistance
- Dedicated relationship manager
- Expert Guidance Personalised advice from experienced investments professionals.
- End-to-End Support From choosing the right plan to claim assistance, we are with you always.
- Claims Assistance Hassle-free claim support to ensure you get what you deserve.
- Transparent Process Clear information, easy documentation and a hassle-free experience.
Overview
Tax-free bonds were issued by government-backed infrastructure entities with interest exempt from income tax under Section 10(15). No new issues have come to market for some years, but existing bonds trade on the exchange and can be bought there.
The exemption is what makes them valuable. A tax-free coupon of six per cent is equivalent to a taxable yield of well over eight per cent for an investor in the thirty per cent bracket, and the gap widens with the tax slab. For high-bracket investors these are among the most efficient fixed income holdings available.
Because they are bought in the secondary market, the price you pay determines your actual yield. A bond trading above face value delivers less than its coupon suggests, and the yield to maturity — not the coupon — is the number that matters.
Who should consider it
Investors in the highest tax brackets, for whom the exemption is worth the most. Retirees seeking tax-efficient regular income. Anyone with a long horizon willing to hold these to maturity.
Benefits
- Interest fully exempt from income tax under Section 10(15)
- Issued by government-backed infrastructure entities
- Long maturities, locking a tax-free yield for many years
- Annual coupon suitable for regular income
- Very high effective yield for investors in high tax brackets
- Listed and tradable on the exchange
What is included, and what is not
Read the right-hand column first. It is the one that tends to surprise people later.
Included
- Bonds issued by designated infrastructure entities
- Tax-exempt annual coupon payments
- Return of face value at maturity
- Purchase through the secondary market on the exchange
- Holding in your demat account
Not included
- Fresh issues — none have come to market recently
- Exemption on capital gains if you sell before maturity
- Protection against price movement in the secondary market
- Reliable liquidity; these issues trade thinly
Terms vary between providers and between plans from the same provider. The offer document you receive is what governs — we will walk you through it before you commit.
How it works with us
- 1 We separate the two risks before anything else Credit risk is whether you get repaid. Rate risk is what the bond is worth if you sell early. Different risks, different answers.
- 2 Horizon matched to maturity A bond held to maturity behaves very differently from one sold in year two. That decision comes before choosing the issuer.
- 3 Rating and issuer examined properly A yield well above the market is telling you something. We read the rating rationale, not just the letter.
- 4 Purchase through the exchange or a registered platform Bonds settle into your demat account. We handle the mechanics and confirm what you actually bought.
- 5 Coupons tracked, maturity diarised Interest dates, reinvestment and redemption. Bonds are simple to hold and easy to forget about.
Important considerations
The things a brochure tends to leave out. Read these before you decide.
- Calculate the yield to maturity at the price you actually pay, not the coupon on the face of the bond. Buying above par reduces your real return.
- The tax exemption applies to interest, not to capital gains. Selling before maturity at a profit creates a taxable gain.
- These trade thinly. Building a position takes patience and you may not get the size you want at the price you want.
- The benefit scales with your tax bracket. For an investor in a lower bracket, an ordinary bond may deliver more after tax.
- No fresh issues are being made. What exists is a finite pool, which is part of why they trade at a premium.
Documents required
- PAN card
- Aadhaar or other identity proof
- Address proof
- Demat account details
- Bank account proof for coupon and redemption credit
- Completed KYC with the intermediary
Frequently Asked Questions
Are new tax-free bonds being issued?
Not for some years. The available supply is a finite pool of existing issues traded on the exchange, which is one reason they frequently trade above face value.
How much is the exemption actually worth?
It scales with your tax bracket. A six per cent tax-free coupon is equivalent to a taxable yield well above eight per cent for an investor in the thirty per cent bracket. For someone in a lower bracket the advantage is much smaller, and an ordinary bond may deliver more after tax.
Does the exemption cover capital gains?
No. Section 10(15) exempts the interest. If you sell before maturity at a profit, that gain is taxable in the ordinary way. The exemption is on income, not on appreciation.
Why does the purchase price matter so much?
Because you are buying in the secondary market, often above face value. Your actual return is the yield to maturity at the price you pay, which can be considerably below the printed coupon. Always work from yield to maturity rather than the coupon.
Are they easy to buy?
Not always. These issues trade thinly, so building a meaningful position takes patience and you may not achieve the size you want at an acceptable price. Treat accumulation as a gradual exercise rather than a single transaction.
Want a shortlist instead of a catalogue?
Tell us the situation and an advisor comes back with two or three options that actually fit — and names what each one gives up.