Skip to main content

Should you invest in IIFCL tax free bonds 2012?

 

It's raining tax free bonds. Earlier this month, Rural Electrification Corp and Power Finance Corp, launched it tax-free bond issue. Yesterday, Indian Infrastructure Finance Company Limited (IIFCL) launched its tax-free bond issue. IIFCL finances infrastructure projects in sectors like power, roads, highways, ports, airports, renewable energy and urban infrastructure.

IIFCL is planning a public issue of bonds to raise Rs 1,500 crores with a green-shoe option to retain up to Rs 9,215 crores. Moneycontrol.com

What is the issue amount?

IIFCL is planning a public issue of bonds to raise Rs 1,500 crores with a green-shoe option to retain up to Rs 9,215 crores. The issue will be on first-come first served basis and will remain open from 26 December 2012 to 11 January 2013.

Features

The face value of is Rs 1,000 per bond and the minimum amount of application is Rs 5,000. The bond is available in three series—10 years tenure (Trench 1 – Series 1), 15 years tenure (Trench 1 – Series 2) and (Trench 1 – Series 3).

And, the company is offering an annual coupon rate of 7.19 percent, 7.36 percent and 7.40 percent, respectively. As a retail investor you will get extra 50 basis points (bps).

So, as retail investors you can earn up to 7.69 percent, 7.86 percent and 7.90 percent. While the annualised yield for retail investors is also the same. As much as 40 percent of the issue is reserved for retail investors. This is a secured redeemable non-convertible bond and does not come with neither call nor put option. There is a ceiling on coupon rates based on the reference government securities (G-Sec rates.)

Ratings

ICRA Ltd, Brickworks and CARE have assigned AAA (Stable) to the bonds. Also, IIFCI is a government of India enterprise. Hence, the default risk is minimum.

Finer Details

The bond is issued in both, physical as well as demat form. Trading of the bond is permitted only in the demat form and comes with a market lot/ trading lot of one bond. Interest from the bond does not form part of total income, and hence it's a tax-free bond.

However, keep in mind that when you sell the bond on the exchange, you will have to pay capital gains tax. If you sell the bond post 12 months, the capital gain will be calculated as per 10 percent without indexation. If you are not the original allottees of the bond and get transferred/ buy it later in the secondary market, you will get a coupon rate lowered by 50 bps then the applicable coupon rate for the retail investor.

Should you invest?

Since these are tax-free bonds, the post-tax returns you earn on these bonds are better than what you would have earned for fixed deposits (around 6.9 percent post-tax for those in the highest tax bracket if FD rate is 9.50 percent). "These bonds are a good tool for those in the highest tax bracket. Also, interest rates are expected to move downwards from January. This is a good time to get locked at higher interest rate, for those who want to invest for the long term," said Pankaj Mathpal, Mumbai-based, Certified Financial Planner.

Keep in mind, that these bonds are for those who are in the highest tax bracket and want a long-term investment because they offer a 50 bps lower rate for those buying the bond from the exchange. So you may not have buyer as per your wish, which means lower liquidity. Look at asset allocation before investing, and once you have exhausted the PPF (8.8 percent tax free) limits.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

 

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now