Bonds are the debt instruments which gives fixed income for the investor. Bonds are issued by Government or Corporate Companies to raise money for the new project. Bond issuer is obligated to pay interest and repay the principal upon maturity to the investor. Bonds are used to raise debts, When investor purchase the bonds, they are lending money to the issuer. Issuer will pay specified rate of interest during the bond term and face value on maturity.
Various Types of Bonds:
1) G-Sec Bonds
2) Corporate Bonds
3) Tax Free Bonds
4) Gold Sovereign Bonds
Benefits of Investing in Bonds:
Bonds provide regular income by interest from issuer. Bonds also provides capital preservation, Issuer repays the principal on maturity of bonds. Investing in Capital Gains in Bonds give you tax exemption on Investment. Investing in bonds gives diversification to your portfolio.
Tax Benefits On Bonds:
Tax on Long Term Capital Gains up to Rs 50 Lakhs can be exempted by investing in 54 EC bonds. Interest on 54EC bonds are taxed as per slab.
Listed Bonds:
Tax on Interest - Taxed at slab rate
Short Term Capital Gains - Taxed at slab rate
Long Term Capital Gains - Taxed at 10% ( More than 1 Year)
Tax Free Bonds:
Tax on Interest - Tax Free
Short Term Capital Gains - Taxed at slab rate
Long Term Capital Gains - Taxed at 10%
(if transferred after 1 year - Listed Bonds)
Long Term Capital Gains - Taxed at 20%
(If transferred after 3 year - Unlisted Bonds)
Mentotax recommends to diversify your portfolio by investing in regular income instruments (Bonds) as per your risk appetite considerating the age factor of investor.
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