on

Zero Coupon Bond - from REC (Rural Electrification Corporation)

REC had issued Unsecured Zero Coupon Bonds in 2010.

With a maturity period of 10 years, these bonds now have remaining 8 years to mature in Dec 2020.

These bonds are now being offered as per details below:

Investment Value :  Rs.8,06,000 (i.e. 50 bonds at Rs.16,120 per bond)
Face Value on maturity : Rs.15,00,000 (i.e. 50 bonds at Rs.30,000 per bond)
Effective Yield : 8.20%


No interest is payable on these bonds. Instead they are issued at a discount. The difference between the discounted price payable now and the face value that you receive on maturity becomes your gains.

Taxation : The gains will be treated as Long Term Capital Gains. Thus, with indexation benefit over 8 years, the net tax liability may be nominal or even nil (depending on the inflation during this period).
TDS : No TDS is applicable. 

Investment Period : Jan 17 to 28, 2013

Issuance : In demat form
Rating : AAA/Stable by CRISIL; LAAA by ICRA; AAA(ind) by FITCH and AAA by CARE

This is a safe investment to put in lump-sum money for long term needs such as retirement, children's education/marriage, etc. Considering that tax may be nominal, the yield of 8.20% is quite attractive.

Really Simple Books on Personal Finance and Investments

Books by Sanjay Matai
Click on the Pic for more info...

When you CARE, you SHARE...

Share Button

Don't bother to come back. We'll send you regular updates... FREE

Subscribe via Email

EXTRA Tips on your Personal Finances...

Powered by Blogger.