India Infrastructure Finance Company (IIFCL) has come up with its first series of infrastructure bonds. You can invest upto 20,000 under infrastructure bonds to get tax benefits under section 80CCF. This is in addition to the 1 lakh limit available under Section 80C, 80CCC and Section 80CCD.
THE PRODUCT
There are two options here. You can opt for a 10-year bond or a 15-year bond. The face value of each bond is 1,000 and you need to subscribe to a minimum of five bonds and in multiples of one bond thereafter. You can even subscribe using a combination of 10-year and 15-year bonds. For example, you can apply for 10 bonds of 10-year period and 10 bonds of the 15-year period. While the coupon rate for the 10-year bond is 8.15%, the coupon rate for the 15-year bond is pegged slightly higher at 8.3% per annum. You could choose to receive interest on an annual or a cumulative basis. Both of them have a buyback option. The 10-year bond has a buyback option at the end of five years, while the 15-year bond has a buyback at the end of seven years. In addition, after the initial lock-in of five years, the bonds will be listed on BSE. The issue closes on March 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 160,000. In the case of women assesses, it is 190,000 and in case of senior citizens, it is 240,000 for financial year 2009-10. Hence, those whose income exceeds these slabs could apply. Thus, by investing 20,000, a person who is in the highest tax bracket of 30.9% can save upto 6,180, while those in 20.6% tax bracket, can save 4,120, and those in the 10.3% tax bracket, can save 2,060.
WHY TO APPLY
This limit of 20,000 per annum is in addition to Section 80C, 80CCC and 80CCD. IIFL is a governmentowned organisation.
WHY NOT TO APPLY
The bonds are locked in for a period of five years, so there is no exit in case you need the money mid way.
For those seeking comfort in safety of returns, the Government of India issued 8% savings bond once again comes to the fore. First launched in 2003, these bonds are issued by the government with a maturity of 6 years. The bonds are available at all times with specified distributors through whom you can apply to invest in them. Here is a quick guide to what the bond offers and its features to ascertain to check for suitability. What are Government of India bonds Government of India bonds are like any other government bonds with specified rate of interest. The rate is fixed at 8% per annum paid half yearly, or you can opt for cumulative payment of interest at the end of the tenure. You can buy these bonds from State Bank of India and its associates, other nationalized banks and some private sector banks such as HDFC Bank Ltd and ICICI Bank Ltd, among others. The bonds can be bought from the offices of Stock Holding Corporation of India as well. They are available in physical form onl...
