Consider the decision to purchase either a five year corporate bond or a five year municipal bond. The corporate bond has a 13% annual coupon with a par value of $1000 with a current yield of 11%. The municipal bond has 11% annual coupon and a par value of $1000 that is currently yielding at 9%. Which of the two bond will be more beneficial to you. Assume that your marginal tax rate is 30%.

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Q: than a ye

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.