There was a huge cry from retail investors as well as from advisers to invest in tax free bonds. But only few have an idea that one can sell them in secondary market before maturity. How much you get depends on interest rate risk. So let me sum up the recently concluded FY 2013-14 tax free bonds current price in secondary market.
Usually return on your bond will be constant as you receive interest (coupon) on it at the specified interval. But if you have any problem or if the price of your bond is quoting at higher price than the face value then you can liquidate it in secondary market. Even though liquidity is bit hard, but still they traded and you get an opportunity to redeem them.
Below is the list of Tax Free Bonds issued in the year 2013-14 and current price at secondary market.
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List is exhaustive also you may see some difficult in identifying the ISIN code. All prices are as of 17th June 2014.
You notice that currently all these tax free bonds are trading at premium (more than their face value of Rs.1,000). Reason for such high trade is because of current interest rate cycle in market. Bond prices will increase when you see fall of interest rate imminent from central banks. So currently inflation is easing a bit and everyone expecting that RBI in future either will maintain same interest rate or reduce. There are always few risks with bonds also which one need to understand.
Taxation of Tax Free Bonds if you sell in secondary market–
If you sell these bonds in secondary market like NSE or BSE, any short term gain (less than a year) will be taxed according to your tax slab. Also any long term gain (more than a year holding) will be taxed at 10%. (Note-According to Sec 48 of Income tax Act, 1961 benefit of indexation is not available in case of bonds and debenture, except capital indexed bonds. So long term capital gain tax can be considered at a rate of 10% on listed bonds without indexation. )
These bonds are meant for long term investment. So it is hard to find a good buy easily as they hardly trade in the market.