Municipal bonds are issued by the local bodies, cities, states or local government when they are in need to generate funds for infrastructure development or any other government projects. They are also known as ‘Muni Bonds’.
It was first issued in the 1997 by Bangalore local body for infrastructure development projects after the decentralization of the 74th constitutional amendment.
Since the money is being invested in the projects for municipal corporations, the risk of default is less. Bonds are exempted from tax provided the buyer adheres to the rules laid by the municipal corporations. The interest is also exempted from taxes.
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