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IDFC Infrastructure Bonds



AS PER the proposal in the Union Budget last year, investment up to . 20,000 in infrastructure bonds is eligible for tax exemption under Section 80CCF.

 

Individuals can now invest up to 20,000 in these bonds in addition to the 1 lakh limit available under Section 80C, 80CCC and Section 80CCD. Earlier this financial year, IDFC, L&T Finance came out with public issues while IFCI issued these bonds on a private placement basis. Now, IDFC has decided to offer the second tranche of these bonds to the public. In the first tranche, the company has already raised 471 crore in November 2010.

The Product:

The bonds offer two investment options. The face value of each bond is . 5,000 and one can apply for a minimum of two bonds. The bonds have a tenor of 10 years and a lock-in period of five years. At the end of five years, you can sell on the stock exchanges, or you can buy them back. While Series 1 carries an 8% coupon, payable annually, Series 2, is a cumulative option where 8% will be paid compounded annually.


   You can purchase the bonds either in the demat or physical form. The issue closes on February 4, 2011.

Who Should Apply:

The maximum amount of income not chargeable to tax in case of individuals (other than women assesses and senior citizens) and HUFs is 1,60,000. While for women assesses, it is 1,90,000 for senior citizen the non-taxable limit is 240,000. Hence, those whose income exceeds these slabs could apply.

Why You Should Apply:

This limit of . 20,000 per annum is in addition to Section 80C, 80CCC and 80CCD. In addition to this, IDFC is a premier infrastructure finance company. Hence, investors could consider applying in this issue.

Why You Shouldn't Apply:

The bonds are locked in for a period of five years, so there is no exit in case you need the money midway.

Key Features:

Credit rating agency Icra has rated the bonds under this offer as 'LAAA' with a stable outlook, indicating highest safety. It is the first company to be classified as an infrastructure finance company (IFC). IDFC has strong financials and the IFC status allows it to diversify its borrowings, access long term funds, obtain more bank financing and external commercial borrowings — all of which will help in its long-term growth ambitions.

 

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