As we approach the end of another financial year and gear up to pay our taxes, the interest in different tax saving instruments are on the rise. While there are various instruments to save tax and invest safely, one important arena to focus on is Government Bonds. Whether it is having a safe savings and investment options or tax savings Capital Gains funds, there are several schemes and bonds that you can invest in.
Government bonds Government bonds have been serving Indian citizens as well as HUFs in various forms from a long time. When it comes to saving taxes, there are two main types of government bonds that are preferred by different people, tax-free bonds and tax saving bonds.
1. 7.75% GOI Savings Bond:
The 7.75% GOI Savings Bond is a newly introduced savings scheme that is replacing the famous 8% Savings Bond. The seven-year bond is replacing the popular 8% bonds and will be available from January 10, 2018. This government bond offers a higher rate of return than fixed deposits and even though the interest earned in the bonds is taxable, the bonds will be exempted from wealth tax under the Wealth Tax Act, 1957. These bonds are available at the face value of Rs 1000 and the return on investment at the end of 7 years will be Rs 1,703.
2. Sovereign Gold Bond (SGB):
Sovereign Gold Bond (SGB) was introduced by the government in 2015 with an aim of curbing the demand for physical gold. SGBs are a smart way of investing in gold for a long period of time. Investing in jewellery, gold bars and coins as well as gold Exchange-traded fund (ETFs) come at a transactional cost. While the cost ranges from 25-30% for gold jewellery to 13-15% in case of Gold bars and coins.
3.Capital Gains Bonds by NHAI & REC:
Capital gains bonds by NHAI and REC help people to save the tax paid on the sale of a long-term capital asset. The Capital Gains Tax is levied on the sale of long-term assets and can be saved if the funds are invested in the Capital Gains Bonds as mentioned under section 54EC within six months of the date of sale. The NHAI and REC Capital Gains Bonds have been known as a favorite in this section and have a face value of Rs 10000.
Indian Railways Finance Corporation (IRFC) Tax-free bonds:
The Indian Railways Finance Corporation (IRFC) tax-free bonds offer up to 8% of tax-free returns. The IRFC tax-free bonds were issued for a face value of Rs 1000 and are available in two series, series-80 (10 years) and series 80A (15 years). The interest earned on IRFC bonds are tax free and were issued in October 2012. These tax free bonds are in the nature of Secured Redeemable Non-convertible Debentures.