Bharat Bond ETF - Safe Long-Term Tax Efficient Debt Option: ICICI Direct
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ICICI Direct Report
The Government of India has come out with the third tranche of its flagship Bharat Bond ETF. The new ETF is a 10-year product maturing in April 2032 and referred to as Bharat Bond ETF April 2032.
The underlying index consists of AAA-rated public sector undertakings with an indicative yield of 6.87%, maturity date of April 15, 2032 and a modified duration of 6.74 years.
The bond ETF will enjoy tax advantage in the form of indexation benefit similar to debt mutual funds (20% with indexation).
While the actual tax implication depends on future inflation index, indicative after tax yield could be ~6.4%.
Bharat bond ETFs provide higher degree of certainty of returns (if held-to-maturity) with a higher safety of capital as it invests in government owned AAA rated public sector bonds.
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