Tax free bonds have acquired a lot of popularity these days considering that the interest income earned from these bonds are free from being taxed. These bonds are issued by government enterprises and there is hardly risk of non-payment of interest amount. The tax free bonds provide fixed rates of interest. The profits from these bonds usually get invested in infrastructure projects.

Tax free bonds come with a long term maturity period of 10, 15, and 20 years. The major issuers of tax free bonds in India are Power Finance Corporation, Indian Railway Finance Corporation and NHAI to name a few.