higher. In the longer run, it would also be possible to sell your bonds in the secondary market for a substantial profit (as bonds are now in demat form). The Rural Electrification Corporation (REC) tax-free bonds have just hit the market and offer investors time horizons varying from 10 years to 20 years, with interest ranging from 8.26% to 8.62% per annum.
The interest on these bonds will be paid annually and does not attract any tax. However, the principal repayment will be liable to capital gains tax — either long-term or short-term tax, depending on the duration one holds the bonds.
The writer is CEO and founder of Right Horizons