Government Bond: If you want to invest in such a government scheme, which not only gives high returns, but is also free from the hassle of paying taxes, then you should invest in government bonds. These are also called tax free bonds in common parlance and according to section 10 of the Income Tax Act, 1961, no tax is levied on the interest on government bonds.
What are government bonds
These bonds are issued by the government and through the money raised from them, the government can build roads, highways or invest in any other work. Generally these are issued for 10 years and can be issued by government companies or institutions. For those who can invest for a longer period of time and desire good returns, these government bonds can prove to be a very good option. No TDS is deducted from you on the investment of these bonds.
What are the important things related to government bonds
- The returns of tax free bonds or government bonds depend to a great extent on their quantum as they are issued in limited quantities.
- Average returns or interest rates ranging from 5.50 per cent to 6.50 per cent are available on these, which give you more returns than FD-Savings accounts.
- Government bond returns are issued on an annual basis.
- Tax free bonds or government bonds are issued in physical mode or digital demat account.
- The bond tenure is usually 10 years but can be for 10-20 years in some cases.