Tax Free Bonds

Government owned companies offer tax free bonds from time to time. The interest income earned from these bonds is tax free. If you wish to buy these bonds, you can do so from the BSE or the NSE, where they are listed.
Some of the companies that have these tax free bonds listed include the likes of Rural Electrification Corporation, IRFC, NHAI, HUDCO etc.

Tax free maturity proceeds

The maturity proceeds from the Public Provident Fund is tax free. What this means is that the interest earned on the PPF is free from tax. The only problem with the PPF is that there is a lock-in period and the tenure of the PPF is 15 years. The other benefit from the PPF is that they offer tax benefits under Sec 80C of the Income Tax Act.

Provident Fund

You can increase the allocation to your Employees Provident Fund, as the interest earned on the same is tax free.

However, you should not withdraw your PF amount before the expiry of 5 years.

It is also a good way of saving money for the more long term and building a retirement corpus.

Exempt from income tax

Agricultural income earned by a taxpayer in India is exempt under Section 10(1) of the Income Tax Act, 1961.

There is a big definition of agricultural income as defined by the Income Tax Act. One needs to study the definition carefully.

Listed and liquid

Hudco Tax Free Bonds are listed on the NSE and BSE.

The bonds pay an annual interest, which is exempt from tax.

There are various series of bonds that are listed and you can pick and choose, depending on where you get high returns.

If you buy at lower rates, your yield is higher, while if you buy at higher rates, your yield tends to be lower.

Another listed investment

Like HUDCO, the Rural Electrification Bonds are also listed on the exchanges.

You can buy the same from the BSE. The bonds have various tenures like 10, 15 and 20 years. Interest on these bonds is paid annually.