Tax Free Bonds - IRFC and Hudco - should you invest?

2012 has brought back season of tax free bonds again in indian markets. there are two issues which are upcoming.

1) IRFC tax free bonds : IRFC is dedicated financing arm of Indian Railways Its sole objective is to raise money from market to part finance the plan outlay of Indian Railways. Company's performance has been rated has excellent for eleven years in row the Department of Public Enterprises.

Interest rates :-

 For Retail/HUF (investment below Rs. 5 Lacs) - 8.15% and 8.30% p.a. for tenure of 10 and 15 years respectively

For HNI/QIP - 8% and 8.20% p.a. for tenure of 10 and 15 years respectively



Credit Rating :-  AAA by Crisil and ICRA
 
Can NRI invest? :- Yes
 
2) HUDCO tax free bonds
 

Housing & Urban Development Corporation Ltd. (HUDCO) is a public sector company fully owned by Govt. of India for financing of housing and urban infrastructure activities in India. HUDCO was incorporated on April 25, 1970 under the Companies Act 1956. The cardinal objective of HUDCO is to undertake housing and urban infrastructure development programmes in the country, provide long-term finance for construction of houses for residential purposes in urban & rural areas

Interest rates :-

For Retail/HUF (investment below Rs. 5 Lacs) - 8.22% and 8.35% p.a. for tenure of 10 and 15 years respectively

For HNI/QIP - 8.10% and 8.20% p.a. for tenure of 10 and 15 years respectively

Credit Rating :- AA+ by Crisil

Can NRI invest? :- No


 Interest rates are expected to fall in future. thus above instruments are providing good returns because interest earned is tax free. Investment is advisable based upon risk profile of investor.