Synopsis
“Exporters may be allowed to file the claim so as to verify the value of the tax-free bond to be given to them, which can be encashed after 3 years, by which time the government revenue would be on sound footing,” FIEO said in a letter to the finance ministry.
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Exporters have proposed the government to issue tax-free bonds in lieu of pending refunds under the Merchandise Export from India Scheme, in the wake of the country’s poor revenue realisation. The Federation of Indian Export Organisations (FIEO) has proposed a mechanism of tax-free bond attracting 6% annual interest with a three-year lock-in period to provide certainty of refund and ensure liquidity for exporters.
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Synopsis
“If your holding in tax-free bonds is small, switching to PPF is the best option. Sell slowly and invest Rs 1.5 lakh per annum in PPF,” says Anil Rego, Founder & CEO, Right Horizons. In addition to the tax free status, current returns (7.1%) offered by PPF is also good.
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Fixed deposits from PSU banks or large private sector banks offer only around 6%.
High net worth investors continue to chase listed tax-free bonds, as returns from other safe debt products have fallen. Since the interest is tax free, pre-tax effective returns are also high. This rush is pushing up prices of tax-free bonds and bringing down their yield to maturity (ytm). The ytm on most of these bonds are only around 4.5% now.