November 13, 2011
Infrastructure Bonds issued by Indian Railway Finance Corporation (IRFC)
Infrastructure Bonds issued by Indian Railway Finance Corporation (IRFC). The interest income earned on such bonds is tax free (u/s 10 clause 15 of Income Tax Act). The bonds are issued by a Government Owned Undertaking and therefore carry a very high credit rating. The issue has been rated ‘AAA/Stable by CRISIL’, ‘LAAA by ICRA’ and ‘AAA by CARE’. The issue has two options – Option I (10 years) & Option II (15 years) – with coupon rates of 7.55% and 7.77% p.a. respectively. As the interest income is tax free, the pre-tax yield works out to an impressive 10.93% and 11.24% for Option I & Option II (for individuals in the highest tax bracket).
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