THE last few months of a financial year always requires some financial action. This usually means that individuals need to ensure that they have completed their tax saving investments.
This time one should give special attention to the area of infrastructure bonds, as this is a new investment option that has been introduced this year.
Given here are a few reasons why the area of infrastructure bonds needs special attention.
Additional benefits: One of the reasons why an investor needs to look at the benefit of infrastructure bonds is that this is an additional benefit that has been introduced from this financial year.
Under the new rules, an extra deduction of Rs 20,000 from the taxable income can be availed for investments into infrastructure bonds, and hence, this area should be focused upon by investors.
There is time till the end of March for the limit to be completed, but this can be done only when there is an issue for such infrastructure bonds present in the market.
With the last three months left individuals should not leave it till the last moment, but should ensure that they complete the requirement when the opportunity is present.
Higher rate: The recent spike in the interest rates in the economy has meant good tidings for individuals because this will also result in a small hike in the rates that are being witnessed for the infrastructure bonds.
This is a good thing because these bonds have a lock-in for a period of five years and even a small rate rise will translate to a higher amount that will be earned over the entire du ration of the loan. While this represents a higher income for individuals, the income from this route is taxed. So there will be a consequent impact that will be witnessed on the tax aspect from the higher income generated.
Debt option: The other factor that has to be taken into consideration is that this is a debt option that is available for the investor.
The presence of a debt option means a lower risk and it is also a sign that there will be a higher confidence of the investor in such bonds as their operation are also easier to understand.
While looking at this aspect, one should understand that the term of the bonds will be of 10 years, but after a lock-in period of five years there will be a buyback option that will be given to them.
Since this is a debt option there is also no need taxable income can be availed for i for the individual to focus too much on the time of investment.
Liquidity aspect: There r investments in infrastructure has to be special emphasis on the entire liquidity as pect of the investment for the investor because this will be low on account of the lock-in.
The investor also has to choose between the various sub options in terms of the nature of the income that they want.
There can be an annual option of the income that can be taken as a payout or there can be a cumulative option and hence that will mean that they should make a choice about the option that is suitable to their liquidity position.
Further, they must also intimate the institution at the time of the subscription whether they will take the buyback option.
All this work is essential at this stage because of the fact that there are longterm consequences of the entire decision and the option cannot be changed once the bonds have been allotted.
