Municipal Bonds, also known as muni bonds, are debt instruments issued by municipal corporations or Urban Local Bodies (ULBs). Investors/lenders, in turn, receive interest payments per the payment cycle and the principal at maturity. The local governmental bodies utilise these funds to finance socio-economic development projects such as building bridges, hospitals, educational institutions, public facilities, or urbanisation of specific regions within their municipality.
Returns from these municipal bonds are then reimbursed from the profits generated by such projects or tax revenues.
Among the several ways available to invest, buying municipal bonds online is becoming increasingly popular. Potential investors can do so via KredX, an online investment platform of digital gold, PMS, and bonds.
Municipal bonds are categorised according to the source of their interest payments and principal repayments. In general, such bonds are not taxable. However, municipalities may issue bonds that are not qualified for tax exemption. Investors looking forward to investing in such bonds can buy municipal bonds of two kinds –
In July 2015, the Securities and Exchange Board of India (SEBI) revised the regulations associated with the issuance of these bonds. According to the latest guidelines, a municipal corporation issuing debt securities must meet the following prerequisites –
Property tax is the only source of revenue for municipalities. Thus, India requires a well-developed muni bond market for several reasons. These bonds will aid the ULB’s to bridge the funding gap to finish projects. This market’s growth is also significant to upgrade the Indian metropolitan cities. Besides, municipal bodies must be self-sufficient to carry out Central’s Smart Cities and Amrut projects successfully.
Hence, investors must subscribe to municipal bonds for strengthening the Indian economy. To make the process simpler, KredX is facilitating investment in municipal bonds online. Investors can buy such investment instruments in a few simple steps to diversify their portfolio and optimise their risk-reward quotient.
When investors buy municipal bonds, the return is exempted from taxation if they comply with the SEBI guidelines.
Trustworthy agencies like CRISIL rate municipal bonds, which offer investors transparency regarding the investment’s credibility.
Muni bonds are safer investment avenues than stocks since government bodies issue them. Hence, investors can dilute the risk in their investment portfolio by purchasing municipal bonds online.
Nonetheless, any individual or entity must assess factors like their risk-aptitude, investment horizon, and objectives before investing in muni bonds. They should also evaluate parameters like the municipal corporation’s credit ratings.