REC Tax Free Bonds 2015 – Details and Review

REC Tax Free Bonds

Tax-Free bonds are back. REC has recently announced the launch of Tax-free bonds for 2015. REC Tax Free bonds will be available with a coupon rate of 7.43%. Tax-free bond is good investment option. We had already had a comprehensive discussion about Tax free bonds 2015. Let’s discuss and review REC Tax-free bonds.

REC Tax Free Bonds 2015 Key Features

  • REC Tax Free bonds issue subscription will open on 27th Oct, 2015 – Tuesday and will be closed on 4th Nov, 2015.
  • Issue subscription will be closed early if it is fully subscribed.
  • The annual Coupon rate for the retail investor (investment less than 10 lakhs) are 7.14% for 10 years.7.34% for 15 years and 7.43% for 20 years.
  • The annual Coupon rate is 0.25% less for corporate and HNI investors.
  • REC Tax Free bonds are rated very good AAA by CRISIL, ICRA and IRRPL.
  • First interest would be paid on 28th December and after that it will be paid on 1st December every year.
  • The interest shall be paid without deducting TDS.
  • The price of each bond is 1000 Rs and the minimum investment is 5 bonds costing 5000 Rs.
  • Maximum investment limit for the retail investor is 10 lakhs.
  • This bonds will be allotted on first cum first serve basis.
  • REC Tax Free bonds will be listed on BSE and can be traded in the secondary market.
  • You can sell this tax-free bonds on the secondary market, however, you need to pay capital gain tax.
  • REC Tax Free bonds can be hold in DEMAT as well as physical form.
  • NRI can also participate and invest in REC tax-free bonds.

REC Tax Free Bonds

REC Tax Free Bonds Yield

REC Tax Free Bonds

Over to You –

REC Tax Free Bonds is very good investment option which can fetch maximum yield up to 10.75%. However, Investment in tax-free bonds is advisable if you are falling under high tax slab 20% or 30%. For lower tax slab, it is advisable to invest in fixed deposits or any other investments and not in tax-free bonds.

In addition to above you should evaluate this investment option based on your financial goal. If you are risk adverse investor and happy with fixed returns you can think of investing in REC Tax Free bonds.

For more information go through Prospectus of REC Tax Free Bonds.

Article by Raviraj

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2 Comments

  1. Ronnie says:

    Dear Sir,

    Thank you for the reply.. Could you please let me know any information on how I can consult an expert (maybe a FEMA expert) to get a confirmed answer on this ? Are there some CA consultancies that provide this type of information, to individuals.

    Thank you

  2. Ronnie says:

    Dear sir,

    I want to trade Forex from India. But as you know forex is not permitted in India.. (Note – I want to trade pairs other than INR)

    Below is a the scenario which I plan to use to trade forex from India. Could you please check this scenario is permitted and let me know the answers to the questions following that:

    Scenario:

    1} Having a work permit abroad, but yet to go there, person XZ opens a bank account (call it account A) in that country on a business visit.

    2} After opening the account there and coming to India he requests his relative (person RS) who is also abroad, to deposit the relative’s own money in our bank account that we opened abroad (i.e account A)

    3} Now XZ opens a forex trading account in his own name that country where forex trading is permitted. He links the bank account he opened abroad (account A) to trading account he just opened. He transfers the money and trades from India using a trading account abroad funded from money made abroad by the relative.

    4} Once he makes a profit, he withdraws the money from trading account to his bank account abroad (account A). He gives money to the relative who deposited the money in his bank account. The remaining profit he keeps.

    5} He pays taxes in that country where he earned the forex money..

    6} He does NOT remit this forex profit money India. He keeps in his account abroad (account A)

    7} He reports the taxes he paid in the foreign country as foreign business income while filing taxes in India (to use Dual Taxation avoidance agreement)

    7} He goes to that country for studies and uses the forex profit money for funding.

    The above is the scenario..

    Questions:

    1} Is the above method permitted ? Since FEMA basically says INR cannot be converted or used for leverage trading. And in the above scenario, we are not doing that..

    2} Is the rule mentioned in the question 1 above the only rule in FEMA ? Or is it also that we cannot use any Internet IP from India to trade forex?

    In other words, its not the trading that is banned correct ? It is the transfer and conversion and usage or Indian rupee that is regulated by this ? If we can fund the trading account in other ways as described in the scenario, we can still trade correct ?

    • Dear Ronnie,

      As per me this scenario is permitted as you are not doing any trading in INR. Money used are of parent country and FOREX is allowed in that country. You will be paying tax as per that country also. Question of Using Internet IP from India does not arise here because use of that site is allowed and it is not written anywhere that you can not do FOREX trading in other country by sitting in India.

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