Tax-free bonds in India: are they still available, and how are they taxed?

Tax-free bonds still pay interest every year until they mature, and they trade on the exchange, but there is no primary issue to subscribe to.

Where can I buy them now?

Route	Examples	What you pay
Exchange order book through a broker	Zerodha (Kite), Kotak Neo, Paytm Money, Angel One	Brokerage, exchange charges, DP charge on sale
Bond platforms	GoldenPi, IndiaBonds, Aspero, Bonds Kart, Bondbazaar, Digifinn	A spread inside the price, not itemised

Sources: Zerodha staff, Kotak Neo, Business Standard on Paytm Money, Angel One, GoldenPi, IndiaBonds, Aspero, Bonds Kart, Digifinn.

IndiaBonds vs Zerodha compares a platform route with the order book. Order books in older series can be thin, so use a limit order and compare the same bond on NSE and BSE.

Can I buy at face value?

Usually not. A Reddit thread from Mar 2024 asks how to buy tax-free bonds at face value rather than at a premium on the open market (Reddit). On the exchange you pay what sellers ask, and if that is above face value your yield is below the coupon. See YTM vs coupon.

How do I compare a tax-free yield with a taxable one?

Divide the tax-free yield by (1 minus your slab rate). Surcharge and cess are left out.

Your slab	Taxable yield matching a 5% tax-free yield
0%	5%
20%	6.25%
30%	7.14%

The exemption is worth most at the highest slab and nothing to someone below the tax threshold. 5% is an illustration; check the yield at the price you would pay.

How is it taxed?

Income	Treatment
Interest	Exempt from income tax
Gain or loss on selling	Taxable: listed bonds held over 12 months at 12.5% without indexation, otherwise at slab

Only the interest is exempt; the capital gain or loss part is a recurring question on TradingQnA (TradingQnA, Business Standard). From 1st Apr 2026 tax law sits in the Income-tax Act 2025, and the section that replaces 10(15) was not verified in our research.

What gets confused with tax-free bonds?

• 54EC bonds save capital gains tax on a property sale, but their interest is taxed at slab (ICICI Direct). See 54EC bonds.
• SGBs pay interest taxed at slab every year (SGB tax).
• Low-yield PSU bonds on platform lists: on 17th Oct 2026 Stable Bonds showed IRFC, HUDCO, REC and IIFCL bonds at 4.75% to 4.80% (Stable Bonds); our research did not confirm which of these are tax-free series, so check the bond's offer terms.