Myfirstcrore team believes that conservative investors falling under higher tax brackets can look at the tax-free bonds as a regular stream of income. Investment in tax-free bonds eliminates the reinvestment risks as money remains locked in for a longer period than bank fixed deposits. Reinvestment risks imply the probability of interest rates going lower in the future on bank fixed deposits.
Tax-free bonds, a good bet for risk-averse investors, are expected to hit markets after a gap of one year. In 2013-14, nearly Rs 50,000 crore was raised through tax-free bonds. The government has already cleared the proposals of the Railways and National Highways Authority of India to issue tax-free bonds.
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