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How Much Can I Invest in Tax-free Bonds?

Ramalingam Kalirajan |7281 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 30, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Jul 30, 2024Hindi

Money

I want to liquidate some of my FDs and invest the corpus in Tax-free bonds. Can you please suggest some good bonds to invest? Is there a cap on how much I can invest on the bonds?

Ans: Tax-free bonds can be a great option for generating tax-efficient income. These bonds typically offer stable returns with the added benefit of tax-free interest.

Investment Cap:
There's no upper limit on how much you can invest in tax-free bonds, but these bonds are often available in limited quantities during their issuance period. They are also traded in the secondary market.

Suggestions:

Look for bonds issued by government-backed entities like NTPC, NHAI, or PFC. These offer safety and decent returns.

Compare the yield to maturity (YTM) and consider the remaining tenure before investing.

Tax-free bonds are usually long-term, so ensure they align with your investment horizon.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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I am a woman, 68 yrs. My investments in HUCO tax free bonds, Tranche 2 and IIFCL tax free bonds, Tranche 2 are getting matured shortly after 10 yrs of investment with Annual interst payment options @8% approx. Please suggest where these corpus of Rs 7 lakh could be invested for a time span of 5yrs max with similar interest payment option. How about Shriram Motor Finance FD scheme for 60 months and SCSS 2004 or, alternatives excluding Mutual Funds? Thanks.

Ans: Hello, my suggestion for you would be to understand more about the debt markets and how they function and how you can use the mutual funds ( debt ) to get the necessary returns you are looking for with an additional gain due to fall in the interest rates as returns and rates are inversely linked.

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Question by Ritesh - Sep 08, 2023Hindi

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Hello, Does investing in Govt Bond Funds from Mutual funds instead of FDs assist you to save more on Tax and get better long term returns. How can we invest in Government Bond funds and which one are recommended. Thanks

Ans: Mutual Fund is a better option not from a tax perspective but liquidity perspective. You will be able to exit before the maturity if at all you want too. The disadvantage is, the market price is visible every day & you will have to control your emotions & not transact.

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Question by Girish - Jul 08, 2024Hindi

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Instead of FD, are corporate bonds are safe investments. Which are good corporate bonds which can yield better interest than FD, so that i can invest 50K and what are platforms to invest in corporate bonds.

Ans: Bond funds pool money from many investors to buy a diversified portfolio of bonds. These can include government, corporate, and municipal bonds. Bond funds offer better diversification and professional management compared to individual bonds.

Safety of Bond Funds
Diversification
Bond funds invest in a variety of bonds. This reduces the risk compared to investing in individual corporate bonds.

Professional Management
Bond funds are managed by experts who make investment decisions. This can enhance returns and reduce risks.

Choosing Good Bond Funds
Credit Quality
Invest in bond funds with high credit quality. Funds that invest in high-rated bonds are safer.

Fund Performance
Look at the historical performance of the bond fund. Consistent returns indicate good management.

Expense Ratio
Check the fund's expense ratio. Lower expenses mean more returns for you.

Benefits of Bond Funds over FDs
Higher Returns
Bond funds often provide higher returns than fixed deposits. They invest in a mix of high-yield bonds.

Diversification
Bond funds offer diversification across different types of bonds. This reduces the overall risk.

Liquidity
Bond funds are usually more liquid than individual bonds. You can buy or sell them on any business day.

Disadvantages of Direct Funds
Direct funds may have lower fees, but regular funds offer significant benefits:

Expert Management: Certified Financial Planners (CFPs) provide tailored advice.

Active Oversight: Regular funds are actively managed by professionals.

Market Guidance: CFPs help navigate market fluctuations and maintain investment discipline.

Final Insights
Research Thoroughly: Choose bond funds with high credit quality and good performance.

Diversify Investments: Diversify across different types of bond funds.

Seek Professional Advice: A Certified Financial Planner can provide expert guidance.

Your interest in bond funds is commendable. With proper research and guidance, they can enhance your investment portfolio.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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Sir, iam Krishna, age 55,Industrial engineering graduate and DIS In Safety, now pursuing MS In industrial Safety( IGNOU ).Iam having 15 plus years experience as safety officer/ manager/ OHS trainer . Please suggest me ,what are the opportunities after my retirement at the age of 60?

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Hi Sir, I am 22 years old and pursuing chartered accountancy at intermediate level. I have given 4 attempts for intermediate level but still not cleared. I am thinking to try something new now because it's taking more time and efforts with no results. Should I remain in finance or move to different career as other finance jobs have very little income, I want to earn high at lower age.

Ans: Gaurav, I have previously elucidated the primary reasons for my inability to pass the CA Exams despite multiple attempts. The Chartered Accountancy (CA) program may not be the right fit for everyone, so consider your strengths, interests, alternative high-earning career paths in finance, and non-finance career paths with high earning potential. Alternative high-earning careers include Investment Banking, Corporate Finance, Financial Planning & Wealth Management, and Non-Finance career paths with high earning potential. Shorter, practical certification programs can help you quickly enter high-paying fields without extensive education. If CA is no longer a fit, consider other certifications, high-paying fields in tech or management, or short-term courses in cybersecurity, cloud computing, or digital marketing. All the BEST for your Prosperous Future.

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Question by Syamaprasad - Oct 15, 2024Hindi

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I am a BAC graduate, 40 years old, working as Accountant and Office Administrator. Advice me for better work places.

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sir i am commerce gratuate prepared 2 years for CA coul'd not succeed what are the diff career op for me

Ans: Shri, Some basic reasons for failing CA exams include poor time management, inadequate conceptual clarity, poor presentation skills, neglecting revision, and lack of practice with mock exams. To improve, create a realistic study schedule, focus on crucial topics, practice time-bound mock tests, and use reference books and ICAI study materials. Practice structured answers and follow ICAI language to align with exam expectations. Avoid rote learning and focus on understanding the "why" and "how" behind concepts. Take multiple mock tests and review performance critically to identify weak areas. Stay motivated by setting short-term goals and rewarding yourself for achieving them.

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My son is doing BBA( 1st year.) Which extra course help him future.

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My daughter studying bsc biotechnology 1st semester please suggest me about her future career

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After BSc, she can work in various sectors and roles, such as lab technician, research assistant, quality control analyst, healthcare and pharmaceuticals, agricultural biotechnology, environmental biotechnology, food and beverage industry, bioinformatics, government jobs, or entrepreneurship. High-paying and in-demand fields include medical biotechnology, bioinformatics, industrial biotechnology, agricultural biotechnology, environmental biotechnology, and genetic engineering.

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Confused about the future after doing bsc biotechnology. In which subject I should do msc ? Ok india or abroad? Which biotechnology sector have high paying jobs ?

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For those looking for cutting-edge research and higher-paying jobs, consider studying abroad in countries like the USA, Germany, or Canada. For those preferring affordable education and a long-term plan to settle in India, pursue MSc in a specialized field from top Indian institutes. Opt for fields like Bioinformatics, Medical Biotechnology, or Industrial Biotechnology, which offer the best combination of high salaries and demand. All the BEST for your Prosperous Future.

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Question by Anirvinna - Nov 22, 2024Hindi

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Sir Greetings! is it true that now UGC wont differentiate rather treats equally both regular and correspondence degree or PG. Even correspondence students are eligible and apply for both govt and private sector jobs. I heard even companies need to accept correspondence degree done in India. Sir please clarify without any ambiguity in this regard. This is Q has been bothering me for quite sometime

Ans: Anirvinna, The University Grants Commission (UGC) and other regulatory bodies in India have made significant efforts to ensure that distance education degrees are treated as equivalent to regular degrees. The UGC states that degrees obtained through distance or online education from recognized institutions are equivalent to regular degrees, applicable for both government and private sector jobs. The Distance Education Bureau (DEB) ensures the quality of distance education programs and oversees compliance. Distance education degrees are valid for all government jobs, professional courses, and private sector acceptance. However, some organizations may prioritize candidates with regular degrees for certain roles due to perceptions of classroom rigor or networking opportunities. The UGC has encouraged universities to offer quality online programs, reducing the stigma associated with correspondence education. To enhance career prospects, consider pursuing correspondence programs from well-reputed institutions with strong alumni networks and industry connections. All the BEST for your Prosperous Future.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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