The following categories of investors can invest in tax free bonds:

• Qualified Institutional Buyers who have been defined under the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000.
• Limited liability partnerships, partnership firms, trusts, co-operative banks, regional rural banks, corporates and other authorized entities.
• Retail individual investors who include members of Hindu Undivided Family and Non-Resident Indians.
• High net-worth individuals which include those investors whose risk appetite are low and can invest up to Rs.10 lakhs.

Thus, the tax free bonds are ideal for modest risk appetite investors as well as high net-worth individuals who are looking for a steady source of annual income, and for those who can afford to lock-in their capital for longer tenures.