The Budget has announced tax-free bonds for infrastructure projects. “The bonds will offer a good opportunity for those in the higher tax bracket,” said Jayant Manglik, president – retail distribution, Religare Securities.
Experts reckon the interest rates for these bonds will vary depending on the yields of 10-year government bonds, with a tenure of more than 10 years.
Tax free bonds are popular with high net worth individuals as the interest is tax free. If the holding period is more than one year, investors have to pay long capital gains taxed at 20% with indexation or 10% without indexation.
The bonds offer a high degree of safety as they are issued by top rated public sector companies. In the past, issuers such as Rural Electrification Corporation, Power Finance Corporation and National Highways Authority of India have hit the market with such bonds.Read our full coverage on Union Budget
Investors will no longer have to incur costs in the form of locker charges or insurance to hold physical gold. Instead they can simply deposit the yellow metal in the government's Gold Monetisation Scheme and earn an interest.
“Those who hold more than 100 gms of gold can use this scheme to earn interest on their holdings. Jewellers and banks can use this gold instead of importing it,” said Jayant Manglik, president – retail distribution, Religare Securities. Although the Budget hasn't spelt out the details, you may be able to make 6-7% returns per annum, with the interest fully taxable, said experts.
The government is also introducing a Sovereign Gold Bond, which will carry a fixed rate of interest, and be redeemable in cash in terms of the face value of the gold, at the time of redemption by the holder of the Bond. However, this product will likely be targeted at institutional players.