List Of Tax-Free Bonds 2025

Many investment options are available in the market, and it can take time to choose the right one. But if your investment goals involve capital safety and tax benefits, the tax-free bond is the right option. In this article lets discuss about tax-free bonds and find the top tax-free bonds for 2025.

What Are Tax-Free Bonds? 

Government Entities issue fixed-income securities. These are known as tax-free bonds. They provide investors with the opportunity for yearly pre-fixed interest earnings and are a reasonably safe investment choice. In addition, the interest received is tax-free, allowing investors to increase their savings. The principal amount is payable upon maturity, similar to other bonds.

These bonds typically have maturities between 10 and 20 years, and their interest rates are usually lower than those offered by other fixed-income investment options. As a result, they are regarded as a secure investment choice and are appropriate for investors seeking a reliable, long-term investment with tax advantages.

What are the types of tax-free bonds?

Here are the major types of tax-free bonds in India, which are traded on the exchange.

Infrastructure bonds: Infrastructure bonds are generally issued by the government, such as state governments, municipal corporations or PSUs.

Housing bonds: Housing bonds are issued by the government to finance the development of housing schemes.

Power bonds: Power bonds are issued by the power companies to support and boost the electricity infrastructure in India.

Railway bonds: Railway bonds are issued by the railway companies, such as IRFC, RVNL, IRCON, etc., for improving the railway infrastructure in India. 

Public sector unit bonds: Public Sector Unit Bonds are issued by PSUs where the Central Government and the State Government own a stake in their organisation of more than 51%

List Of Tax-Free Bonds 

Find the tax-free bonds list 2025 below, along with their details: 

How To Apply For Tax-Free Bonds? 

You can invest in a tax-free bond through a primary or secondary market. You can apply online or offline by following the steps given below:

• Step 1: Choose a financial organisation with a solid market reputation. The choices include banks, stockbrokers, and mutual funds, among others.
• Step 2: Look into the various tax-free bonds on the market and their benefits. To make an informed choice, research the issuer, interest rate, tenor, credit rating, etc.
• Step 3: Check your eligibility and any age restrictions to see if you match the requirements.
• Step 4: You must have a Demat account to purchase tax-free bonds. You can get one with your preferred financial institution.
• Step 5: Apply for a bond online or by visiting their office.
• Step 6: Transfer the amount required to purchase the bond to your Demat account and wait for allotment. This may take a few days.
• Step 7: Keep track of the bond once allotted. Checking your Demat account frequently or signing up for alerts from the financial institution are two ways to manage this.
• Step 8: Check your Demat account for interest credits. Tax-free bonds usually give out interest annually or semi-annually.

Features And Benefits Of Tax-Free Bonds 

Have a look at the features and benefits of tax-free bonds before you start investing: 

Security:
Investors are drawn to tax-free bonds because they provide a constant, tax-free income stream with no chance of losing money. After all, the bonds are backed by government securities.

Stable income:
Investing in tax-free bonds will earn you an annual guaranteed income. Along with the principal returned to you at maturity, the yearly interest payment is tax-free too.

Higher profit for higher tax limit:
Tax-free bonds are a great investment choice for high-net-worth individuals aiming to increase their fortune. As a result, you can generate greater profits if you come under a higher tax bracket. 
Furthermore, there is no maximum investment amount permitted in tax-free bonds. As a result, you can invest more for better returns and more tax advantages. 

Coupon rate:
Given that the interest on these bonds is tax-free, the coupon rate for tax-free bonds typically varies from 5.50% to 7.50%, which is fairly appealing.

Liquidity:
Tax-free bonds have low liquidity when compared to other asset types. Thus investors need to be aware of this. One can purchase tax-free bonds via stock exchanges because they are listed on the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) by using a stock-broker.

Tax-free Bonds For Senior Citizens 

Tax-free bonds are an ideal investment option for senior citizens due to the following reasons:

• Government organisations back them. Hence, they have very low chances of default. 
• These bonds offer capital security. 
• You can earn a regular, stable income from interest payments. 

Difference Between Tax-Saving Bonds And Tax-Free Bonds 

Tax-free and tax-saving bonds sound similar. But there are some significant differences between them. Learn their differences, so you don’t get confused and make the right investment choice.

Conclusion 

Tax-free bonds are best suited for risk-averse investors with a low appetite for risk. Also, they are appropriate for those who want to invest over a longer time horizon. Hence, consider your financial and liquidity needs before choosing a tax-free bond.