Bharat Bond ETF is the first government-approved exchange-traded fund or corporate bond. The bond is open for subscription from December 12-20 with a base size of Rs. 7,000 crore. With the launch of the Bharat Bond ETF, the government is eyeing additional funds for its public sector companies and other government organisations.
Bharat Bond ETF is a government-backed exchange-traded mutual fund so your money will be invested in bonds issued by public sector companies. Small investors have been provided easy access to the bond market as they have been allowed to invest in Bharat Bond ETF with an amount as low as Rs. 1000. Edelweiss AMC has been given the responsibility of managing the launch of Bharat Bonds.
In case you are planning to invest in Bharat Bond ETF, here is what you need to know:
What Makes Bharat Bond Special
Bharat Bond ETF is a government-approved corporate bond that assures capital safety for you. Your money will only be invested in AAA-rated bonds of public sector undertakings (PSUs). The new ETF will be listed on the stock exchanges and will have two variants. One will have a fixed maturity of three years and will follow the Nifty-Bharat Bond Index April 2023 and the second will have a maturity period of 10 years and will follow Nifty-Bharat Bond Index April 2030. The present yield in public sector bonds range between 6.5-7.5%.
How Will You be Taxed?
Your gains from these ETFs will be taxed like those from a debt-fund. So if you hold bonds for more than three years, your gains become long-term and are taxed at 20% with indexation benefit, which benefits investors in the 20% and 30% tax slabs. But of the gains are short-term, they are clubbed with the investor’s income and taxed as per his slab. Thus, experts suggest those who want to reap in maximum benefits from these bonds should hold it for the complete tenure. It has also been advocated as an alternative to fixed deposits for more tax-efficient returns.
An ETF includes a bouquet of stocks or bonds. It is traded like individual stocks during trading hours on the stock exchange. The decision for you to invest in Bharat Bond ETF should depend on your financial goals. When in doubt, consult an investment advisor.
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