What is Tax Saving Bonds and Tax Free Bonds

  • Posted on: 16 February 2018
  • By: admin

What are Tax Saving Bonds? 

What is bond? in simple term it is a document which promise the holder certain benefits in exchange for an investment. As the name indicates, Tax Saving Bonds are bonds which help people to save tax. These bonds offer special tax exemption, helping them save a certain portion of overall tax. People can purchase these bonds and earn a certain interest. Tax Saving Bonds come with a minimum lock-in period of 5 years. 

Tax Free Bonds Another popular alternative is Tax Free Bonds, which is also bonds which are tax free. But this is not eligible for deductions under Section 80C of the Income Tax Act. Also Interest is not taxed by the government. In case of Tax Saving Bonds, interest earned is taxable by the government 

Section 80CCF: Tax saving bonds has privileges under Section 80CCF of the Income Tax Act which states that individuals enjoy tax deductions up to Rs 20,000. This deduction is excluding the Rs 1.5 lakh provided under Section 80C of the Act.