How to invest in tax-free bonds?

Tax-free bonds provide the opportunity for high net worth investors to enjoy tax benefits. It is possible for these investors to apply for the bonds through online or offline. Apart from investing through online or offline, the user also possesses the opportunity to hold the investment in demat or physical model.


How to buy tax-free bonds?

  1. Public issue of the bonds: An investor can invest in a tax-free bond during the time of initial public offering by submitting of physical form that contains all the details. Additionally, it is also possible to invest in tax-free bonds with the help of brokerage companies that offer online services.
  2. After the public issuance: After issuance of the bonds, the investor can purchase them from the stock exchange. One can invest them and begin trading similar to that of shares.

It is necessary to remember the fact that investing in tax-free bonds should not be because of the tax exemption provided by the government. The investor should keep in mind about the tenure before investing large sums of money. It is beneficial for those who fall in the higher tax bracket.

How to invest in tax-free bonds during public issue offering(online)?

The following steps will be helpful in investing in tax-free bonds using the online way during the initial public offering.


  1. Log on to the trading website and click on the IPO.
  2. Choose “Place Order”.
  3. Select from the available options such as – ASBA-Retails, HNI, Retails, etc. Click Cut-off, and enter the value of the lot size that you wish to invest.
  4. The website will display a message of confirmation for the selected tax-free bond to proceed ahead.
  5. Go through the disclaimer, terms, and conditions, and click the “I Agree” button.
  6. The trading platform will display another message asking you to hold the required funds necessary for investing in the selected tax-free bond.
  7. Upon completing the transaction, click okay and proceed to place the tax-free bond order.
  8. Upon receiving the message, you successfully placed an order for the tax-free bond.

How to Invest in tax-free bonds offline(Physical Mode)?

If the investor chooses to opt tax-free bond offline, he/she will have to submit an application that contains relevant details about the applicant at the stock exchange. Can download the required form from the stock exchange website or other online websites that offer information related to tax-free bonds. It is necessary to provide information whether the trading occurs through the demat account or not. In addition to it, for those who wish to acquire the bonds in physical form, there have to tick the relevant column while filling the application. The application carries the list of distributors of brokers across the country who are eligible to accept the forms.

  1. Download the form, from the website.
  2. Fill the relevant details such as name, date of birth, address, and PAN details.
  3. Choose the required investor category – category I for qualified institutional bidders, category II for non-institutional investors, and category III for high net worth individuals.
  4. Select between physical or demat the form. If opting for demat, then provide details of the demat account.
  5. Provide details related to the nominee.
  6. Fill the details of the bank for a refund of the interest/maturity.
  7. Investment instruction – The number of bonds and tenure (10/15/20 years)
  8. Payment details- For non-ASBA provide details of a cheque, and for ASBA offer account details
  9. Send the filled application to the mentioned address to open the tax-free bond.

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