Infrastructure Bond
In Order to garner additional resources for financing of infrastructure projects, the Indian Govt. decided to offer Income Tax benefits on Infrastructure Bonds Under Section 80 CCF of the Income Tax Act, 1961, Investment upto Rs. 20,000 made in Long-Term Infrastructure Bonds (as notified by the Central Government) will be eligible for Tax Deduction. The underlying reason believed the initiative is to encourage more Investment in the Infrastructure space. But Infrastructure financing companies can raise only upto 25% of their Incremental Investment in the previous financial year from these bonds.
Advantages of These Bonds:
The Advantage of these bonds is the Tax Deduction that comes with them. The bonds gives you an additional Tax Deduction of Rs. 20,000 over & above the Rs. 1,00,000 that you are eligible for Under Section 80C. So subscribing to these bonds will allow you to get Tax Deduction upto Rs. 1,20,000 on your Income.
Tax Benefits:
An investment of rs.20,000/- would fetch a tax exemption of Rs.2060 if your tax rate is 10.30%, Rs.4120; if your tax rate is 20.60% and Rs.6180/- if your tax rate is 30.90%.
Infrastructure Bonds: A Snapshot
» Tenure : 10 Years.
» Lock-In : 5 Years.
» Yield : Will not exceed the yield on 10 years. GOI Securities as reported on the last working day of the month immediately preceding the month of issue of the bond.
» On Maturity : On completion of 10th year bond redemption will be at Par.
» Loan : After the lock-in is over the bond holder can pledge / lien / hypothecate the bond with any commercial bank to obtain a loan.
» Listing : Bond will be listed on the exchange & will be available for trading, subject to volumes & expires of Lock-In.
» Option : a) Non cumulative & buyback after five years. b) Cumulative & buyback after five years. c) Non cumulative & no buyback. d) Cumulative & No buyback.
» Note : PAN CARD is compulsory for subscribing these bonds. Since, the bonds are issued in demat form, so demat is also required.