Tax-Free Bond

Tax-free bonds are long-term debt instruments issued by government-backed public sector entities—such as NHAI, REC, PFC, HUDCO, and IRFC—where the interest income earned by investors is fully exempt from income tax under Section 10(15)(iv) of the Income Tax Act. This tax exemption makes the effective post-tax yield on these bonds particularly attractive for investors in higher income tax brackets. Tax-free bonds in India typically have maturities of 10, 15, or 20 years and are listed on exchanges for secondary market trading, providing liquidity. They are a popular choice for HNIs and retirees seeking safe, tax-efficient, long-term income.