Mutual Funds
Both FD and investment bonds are fixed-income savings instruments. While FD interest rates are higher than investment bonds, investment bonds offer more tax benefits. Both fixed deposits and investment bonds involve saving a certain amount of money for a specified period. Capital Gain Bonds – Under section 54EC of income tax act, an investor need not pay tax on any Long-Term Capital Gains arising from sale of any capital assets. If the entire Capital Gain realized is invested within 6 Months of the date of sale, in eligible bonds. Currently, following are permitted to issue Capital Gain Bonds Under Section 54EC:-
• Rural Electrification Corporation Limited (REC)
• National Highway Authority of India (NHAI)
• Power Finance Corporation Limited (PFC)
• Indian Railway Finance Corporation (IRFC)
7.75% GOI Bonds – These are like any other Govt. Bonds with specified Rate of Interest. The rate is fixed at 7.75% per annum paid Half Yearly, Yearly, or you can opt for cumulative payment of interest at the end of the tenure. These Bonds are issued by the Government with a maturity of 6 Years.
Advantages of Investing in Fixed Rate Bonds
1. Fixed Returns- One of the major benefits of fixed rate bonds is that investors are aware of the interest they will earn on their deposit for a fixed investment tenure.2. Low Risk- In comparison to stock market instruments, fixed rate bonds are less risky. The reason is, bonds can overcome market volatility (For eg: market recession)
3. Safety - The Credit rating agencies rate these bonds based on their creditworthiness. Corporate bonds are riskier than government bonds .