Skip to main content

IDFC Infrastructure Bonds

 IT'S that time of the year when employees have to make a declaration of investments, both under Section 80C and 80 CCF, to their companies. Tax payers will get additional benefits of 20,000 under Section 80CCF. This benefit, which was introduced last year, is only for infrastructure bonds.

So, Infrastructure Development Finance Corporation (IDFC) issue of infrastructure bonds, which were launched today, has timed things perfectly for the employees. It is offering an annual return of nine per cent per bond with a maturity of 10 years. The minimum investment required is 10,000 (two bonds of face value `5,000 each). And, investors can receive the bond papers in either physical form or demat. There may be more issues from other companies, too.

However, experts said that unlike last year, the rates offered may not climb steadily with each issuance (the rates rose from 7.5 to eight to 8.25 per cent over the three tranches announced by IDFC in October 2010, January and February, 2011, respectively).

The returns from these are benchmarked against the 10-year government securities yield. Given the uncertain interest rate environment, it is difficult to predict the rate movement and whether subsequent rates for any issues will be higher.

By and Large, Interest rates are likely to remain stable in the near term. Even in the long term, these are not likely to rise much.

Considering the relatively small amount of investment, financial planners feel those in the highest tax bracket can invest funds right away. Others can exhaust the other tax-saving avenues first and then turn towards this, though not later than January

INTEREST PAYOUT:

One can choose from an annual or cumulative interest payout. In the case of latter, the interest will be compounded annually and on maturity one will receive `11,840 per bond. Say, you invest `20,000. In case, you opt for the cumulative option, you will get `47,360, a pre-tax return of 27,360. However, if you choose the annual interest payout option, you will get 1,800 yearly, a total of `18,000 over the 10-year period.

The option chosen will depend on ones cash requirement. However, at 1,800 annually, financial advisors deem the amount low. They feel investors may be better off with the cumulative option.

TAXATION:

These long-term bonds allow individuals to claim up to `20,000 as deduction under Section 80CCF, in addition to the regular section 80C limit of `1lakh. However, the interest earned on the bonds is added to your income and taxed according to the slab.

Any investment in excess of the 20,000 limit does not make sense. Reasons: One will get higher rates from other debt products like fixed deposits, and for lesser maturity periods. For instance, SBI offers a 9.25 per cent return on one- to ten-year deposit.

EXIT ROUTES:

There is a lock-in of five years. Investors looking for an exit can opt for a buyback after that. However, they must intimate the company six-nine months prior to the buyback date, to be able to exercise the option. After the lock in period, the bonds will be listed on the stock exchanges, providing a second exit route. However, There isn't much liquidity in this space, as bonds are not traded regularly. If one wishes to exit the investment, a buyback may serve the purpose better. The current issue is open from November 21 to December 16.
 

Download Section 80CCF Tax Saving IDFC Infrastructure Bonds Application Form

 

http://www.docstoc.com/docs/105113341/IDFC-Long-Term-Infrastructure-Bond-Tranche-1-Application-Form

 

Download Section 80CCF Tax Saving L&T Infrastructure Bonds Application Form

 

http://www.slideshare.net/PrajnaCapital/lt-long-term-infrastructure-bond-tranche-1-application-form

Popular posts from this blog

Mutual Fund Exit Load Changes

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 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...
Read more

Birla Sun Life Mutual Fund Launches Birla Sun Life NIFTY ETF

Birla Sun Life has launched a new fund namely, Birla Sun Life Nifty ETF, an open ended exchange traded fund. The new fund will be open for subscription from 4th July to 18th July 2011, at an offer price of Rs 10 per unit. The investment objective of the scheme is to generate returns that closely correspond to the total returns of securities as represented by S&P CNX Nifty, subject to tracking errors. No exit load will be charged under the scheme. The performance of the scheme will be benchmarked against S&P CNX Nifty and will be managed by Satyabrata Mohanty.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   1) DSP BlackRock Mutual Funds: http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html   2) Reliance Mutual Funds: http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html   3) Birla Sunlife Mutual Funds: http://prajnacapital.blogspot.com/2011/...
Read more

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...
Read more

Mutual Fund Reivew: Birla Sun Life Asset Allocation Conservative

Birla Sun Life Asset Allocation Conservative has numbers on its side to prove its credibility… Don't be surprised to find this Fund of Funds ( FoF ) in our recommendations. It has earned its place. And despite the difference in the structure of the product, there is no arguing with the numbers.   Of the total 6 years of its existence, the fund has been among the top 10 funds in its category in four of them. Last year it put up an average show and the only year it underperformed its peers was in 2008.   One aspect to look at when investing in an FoF is the expense ratio. The expense ratio of an FoF is capped at a lower limit of 0.75 per cent (2.50% for an actively managed fund). However, the FoF not only has its own expense (though lower) but even the expense ratio of the fund it is investing into. Fortunately, the fund manager takes that into account. "Expense is one of the important criteria used for fund selection and is the main reason for our investment in BSL Ind...
Read more

Short-Term Investment Options in Mutual Funds

Mutual funds offer liquid funds and ultra short term funds in the debt category, which are suitable for short investment periods. Ultra short-term funds were earlier known as liquid plus funds. Liquid funds invest in money market instruments with a maturity of 91 days or less. However, there are no such restrictions for ultra short-term funds. Who should invest in these? These are open-ended schemes. Investors with a short investment horizon or with surplus cash and low risk appetite should look at these. These could include corporate as well as retail investors. Those interested in staying invested for less than 15 days can opt for liquid funds. Retail investors who want to remain invested for two-four months, can look at ultra short-term funds. The short duration for both liquid and ultra short-term funds shields them from any interest rate volatility.   What kind of returns do they offer? In terms of an investment period less than 15 days, these funds are comparable to a ba...
Read more
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