Fixed Income
NABARD and IRFC tax-free bonds – Finale for FY15-16
Both NABARD and IRFC are offering 7.64% for 15-year tax-free bonds. NABARD bonds opened today, while IRFC will open on 10th March. The trend in recent issues may see both the issues being oversubscribed on the first day itself
The National Bank for Agriculture and Rural Development (NABARD) is raising Rs3,500 crore tax-free bonds for the first time on Wednesday, 9 March 2016. It will have investor attention even though the rate of 7.64% for the 15-year bond is what was available with recent issues too. There will be interest among investors, as these are the last two opportunities for FY15-16. Indian Railway Finance Corporation (IRFC) will raise Rs2,450 crore tax-free bonds from 10th March offering the same interest rate as NABARD. As both issues are coming at almost the same time, there may be division in the investment on the part of investors, but it may still be oversubscribed on the first day. Both issues are rated AAA by CRISIL.
The possibility of rate cuts by Reserve Bank of India (RBI) in the near future will also spur the demand for tax-free bonds. Investors who have applied for recent issues of National Highway Authority of India (NHAI) (24th February issue) and Housing and Urban Development Corporation (HUDCO) (2nd March issue) are still waiting for refund, as they could not get the full allotment, due to oversubscription on the first day itself. Due to the pending refunds, investors may not have enough liquidity for NABARD and IRFC, unless they had kept funds ready for it in advance.
Investors applying for NABARD and IRFC tax-free bonds on the first day itself may get good allotment. It just depends on investor liquidity and interest in the last two issues for the financial year, even though the coupon is not close to the psychological barrier of 8% per annum. IRFC issue will be open only for three days, which shows the confidence of quickly getting full subscription for all categories.
The Budget 2016 has made allocation of Rs55,000 crore for highways sector of which NHAI can raise tax free bonds of Rs15,000 crore. Interest rate cycle is difficult to predict. Investors who purchased many tax-free bonds in 2012-13 at a coupon of nearly 8% may have missed 2013-14 issues of over 9% coupon, if they had not kept funds ready for it. So, invest in upcoming tax-free bonds, but do not exhaust all the funds. If there are tax-free bond issues in the next financial year, it will be almost impossible to guess whether future coupon rate will be higher or lower.
Tax-free bonds from government enterprises are a good option for those in the higher tax bracket and for investing for the long-term. With 10-year bank FD offering 7%-7.5% taxable interest, tax-free bonds with 7.29% coupon for 10 years (7.64% for 15 years) are attractive for those in 20% or higher tax bracket. Awareness of tax savings, by investing in government-owned companies’ tax-free bonds issues, has helped recent issues offering around 7.5% pa coupon. 
The stock market decline in recent times has attracted investors to tax-free bonds. High networth individuals (HNIs), including Bollywood stars and corporate honchos, have been big investors in the current financial year. Smaller-size issues are getting oversubscribed on the first day itself even for the retail quota; hence, get ready for the March tax-free bonds finale.



Pradip Nagpal

11 months ago

Which are the forthcoming tax free bond

Kumar Swamy

1 year ago

No more tax-free bonds for the year 2016-17?

9 Signs It May Be a Tax Return Scam
Don’t file with fraudsters this tax season
You may hate to do your taxes, but some scammers eagerly await the season. And as we approach Tax Day this year, the US Internal Revenue Service (IRS) is warning of identity theft scams where fraudsters trick taxpayers into providing personal information over the phone or through email by impersonating IRS agents and aggressively threatening arrest, deportation, and other actions, if the person on the other end doesn’t immediately comply. 
The agency reported a 400 percent surge in phishing and malware incidents this tax season. 
Even more worrisome, a recent audit by Online Trust Alliance, a Washington-state based non-profit, found that about half of firms that have agreements with the IRS to provide free online tax preparation and filing services are not adequately protecting customers’ privacy and security against cybercriminals. Cyber-criminals who gain access to the accounts are filing false returns and refund claims. 
But that’s not the only way fraudsters are attempting to make hay on the season. Here’s what you should know so you don’t get fleeced when filing your claims:
  1. The IRS will never call to demand immediate payment. Period.
  2. The IRS does not contact taxpayers by email, text, or through social media to request personal information. If you get a communication from someone purporting to be from the IRS, it may be someone trying to steal your identity by getting your personal information. Report such attempts to [email protected]
  3. Promises of larger-than-normal tax returns should be a red flag that the tax preparer may not be above board.
  4. Ethical tax preparers do not charge a percentage of the refund amount as a fee or require you to split the refund with them.
  5. Some scammers pose as fake charities to attract donations from taxpayers. Look into the status of a charitable organization before you donate.
  6. Every tax preparer has to have a PTIN (Preparer Tax Identification Number). Ask to see the number. (A list of IRS actions against preparers can be found here if you want to see if the preparer has had a problem before.)
  7. Tax preparers who encourage you to place false information on your tax return are breaking the law.
  8. Promises of “free money” from the IRS or Social Security refunds or rebates are part of scams known to lure low-income and elderly consumers to a fraudulent website or tax scam artist.
  9. Fraudsters will try to attract taxpayers by promising that you can file a tax return with little or no documentation, which is untrue.

The IRS offers free assistance in preparing taxes. More information on how to pick a tax preparer and programs offered through the IRS can be found here. Additional information about tax season scams can be found here.


This article was originally published on 2/24/14 and updated several times. 


State-run banks' bad loans rise by Rs.1 lakh crore in 9 months
New Delhi : Non-performing assets (NPAs), or bad loans, of public sector banks (PSBs) have increased by close to Rs.1 lakh crore in the first nine months of the current fiscal, parliament was informed on Tuesday.
"The gross non-performing assets (NPAs) of the PSBs increased from 5.43 percent as on March 2015 to 7.30 percent as on December 2015," Finance Minister Arun Jaitley told the Rajya Sabha in a written reply.
Gross NPAs of state-run banks increased from Rs.2,67,065 lakh crore in March 2015 to Rs.3,61,731 lakh crore in December 2015, he said, making for an increase of Rs.94,666 crore over the nine months of the current fiscal.
In reply to another question, Jaitley listed specific measures to address the issue of NPAs.
He said the government has approved establishment of six new Debt Recovery Tribunals, to speed up recovery of bad loans of the banking sector, in addition to the existing 33.
The Reserve Bank of India has also taken steps, including formation of a Joint Lenders' Forum (JLF) for revitalising stressed assets in the system, flexible structuring for long term project loans to infrastructure and core industries and Strategic Debt Restructuring (SDR) scheme, Jaitley added.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.


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