Tax – Exempt Bonds

Tax – Exempt Bonds These are long – term (7 – 10 years) debt instruments, cumulative and non – cumulative, issued by the government or public sector enterprises, usually with a tax – free interest up to 10.5% p.a. These are attractive investments for those who are in the higher brackets of income tax. The interest is completely tax free, up to any amount, and the principal is entitled to wealth tax exemption up to rupees fifteen lakhs. On death of the investor, some of these bonds can be passed on to the successor without attracting any gift tax.

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