Tax-Free Bonds: Get more out of it

About Tax-Free Bonds

If you want to earn a good income without raising your tax liability, Tax-Free Bonds are a good option for you. One can get a coupon rate of 8.71% out of the 15-year-old REC bond option. A person, who is in the 30 % tax bracket, can experience a pretax return of 12.6 %. Even for the people who are in the 20 % tax bracket, the pre-tax return is not less than at 11 %.

One can easily derive additional tax benefits if your spouse is under lower tax benefits and does not have any taxable income. You can encounter the clubbing arrangements that go under Section 60 when you blessing your cash to your companion for speculation purposes.

You can without much of a stretch handle an expense exchange by putting resources into your mate’s name as the pay clubbing is done at the principal level of pay. The income that comes from your investment will be treated as yours until and unless the interest gained is used for reinvestment purposes.

Here is the procedure as to how you can easily experience the clubbing provision :

• Gift a sufficient amount of money to your spouse for further investment.
• Tell her to invest in tax-free bonds.
• The interest gained will be added to your income. As Tax-Free Bonds are tax-free, you will not have to experience any tax liability.
• If your wife uses this interest for investment, she can use this money to invest everywhere, but this time your income will not be clubbed.

These tax-free bonds work only if your spouse lies in a lower income tax benefit and doesn’t have any taxable income. If you have made investments in the name of minor children, you cannot extend this same strategy. If a parent earns more and the income of a minor child is clubbed with a parent, there is only a small annual exemption of Rs 1,500 per child for such income.

This was all about Tax-Free Bonds

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