A subscription to the Bharat Bond ETF is open to the retail investors from 14 July 2020 to 17 July 2020. The bond ETF is available in two maturity variants of five years and 11 years. The bond ETF is market-linked and subject to market risks and interest rates prevailing from time to time.
The bond ETF does not carry any interest or dividend. At maturity, the sale proceeds get taxed as capital gains. The gains are long-term in nature when an investor holds the bonds for more than three years. The long-term gains get taxed at 20% after indexing the cost using the notified cost inflation index.
The bond ETFs are tradable on the stock exchange. In case an investor sells them within three years, the gains are short-term in nature and taxed as per the slab rates on regular income of the investor.
Thus, a long-term investment until maturity is tax-efficient in comparison to short-term trading of the bond ETF. Also, the bond ETF carries a low expense of 0.0005% p.a. It costs Rs 1 for Rs 2 lakh worth of investment.
Also Read: Tax Query: Can I claim capital gains exemption on investments in bonds?
The indicative yield as per the website https://www.bharatbond.in/ is 5.37% for bond maturity of five years, and 6.54% for bond maturity of 11 years. The indicative yield value is as on 15 July 2020.
The Bharat Bond ETF will, in turn, invest in bond issues of CPSEs, CPSUs, CPFIs and other government organisations/undertakings with AAA rating.
The bond ETF is available for purchase and sale from your Demat account or trading account similar to other market-linked securities. The minimum investment is Rs 1,001, and a maximum is Rs 2 lakh for retail investors.
For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in
I am a Chartered Accountant by profession. I specialise in personal taxes and corporate income tax matters. I am an avid reader and track developments in financial markets, economy and other market developments.
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