Long-term investments are important. As Robert Kiyosaki once observed, “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”
Aiming for long-term returns comes with a multitude of benefits such as a lower expense ratio, less impact of short-term volatility, the advantage of compounding, etc.
However, long-term capital gains are subject to tax.
Let’s elaborate on that.
Here’s where Section 54EC comes to your rescue. This section basically allows individuals to save on taxes by investing in certain specified long-term bonds. The National Highway Bond is one example of a tax-saving bond.
Also Read: How To Start Investing? A Beginner’s Guide
Should you invest in NHAI Bonds?
The National Highway Authority Of India Bonds are commonly known as Sec 54EC bonds. The National Highways Authority of India (NHAI) operates as a legally established body under the National Highways Authority of India Act, 1988. An individual can invest in these bonds to save on the tax applicable over the long-term capital gains arising from the sale of this investment. NHAI looks after the development and maintenance of national highways and other projects powered by the government of India.
What Are The Features Of The NHAI Bonds?
- An autonomous government agency issues NHAI bonds.
- NHAI is responsible for overseeing national highway projects in India and plays a crucial role in the collection of toll fees from these highways. This enables NHAI to effectively monitor and regulate the traffic flow on the highway roads.
- The National Highway Authority of India bond has the AAA’s highest credit rating which means it is a safe investment.
- NHAI bonds come with a lock-in period of 5 years.
- For NRI investors, a TDS deduction is applicable as per the DTAA form.
- The Indian government does not provide residents of India with a TDS deduction from the interest earned on NHAI bonds.
Things To Keep In Mind:
- The interest on NHAI bonds is paid annually on April 1st, while the final interest is paid upon maturity of the bond.
- The investment in NHAI bonds starts with a minimum of ₹10,000/-, equivalent to one bond, and can go up to a maximum of ₹50,00,000/-, which is equal to 500 bonds.
- These bonds are not transferrable and non-negotiable.
- You can hold these bonds through the physical mode or through your demat account.
Also read: 6 Strategies To Reduce Investment Risks
What Is The Current Interest Rate Of NHAI Bonds?
As of February 2023, Nitin Gadkari, the Union Minister for Road, Transport, and Highways, announced the ministry’s intentions to launch the National Highways Infra Trust (NHAI InvIT) bonds every 15 days, offering attractive interest rates of up to 8.50 per cent.
How To Apply For The NHAI Bonds?
These Capital Gain bonds are available for purchase from NHAI/REC directly or through authorized brokers by personally visiting their office to complete and submit the physical form. Moreover, there is also an option to acquire these bonds through online mode.
Also read: 5 Financial Planning Strategies To Save Money
Conclusion:
Being government-regulated and AAA-rated bonds, these are comparatively quite safe to invest in. Moreover, the highway authority’s debt has been gradually decreasing, creating a strong financial foundation. The government anticipates NHAI to bring in a total collection of above ₹1.40 lakh crore. So, if you’re looking for a long-term and low-risk tax saving scheme, NHAI is worth keeping an eye out for.
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.
