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

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.
Read more

Impact of Demonetisation

The government's move to demonetise `500 and `1,000 currency notes will immediately impact reserve money and money supply in the system along with the balance sheet of the Reserve Bank of India, the sole authority in the country for accepting currency notes and coins as legal tender. ET explains the interplay of currency, reserve money and money supply. 1. What is currency in circulation? It is the total value of currency (coins and paper currency) that has ever been issued by the central bank minus the amount that has been withdrawn by it. Currency in circulation comprises currency notes and coins with the public and cash in hand with banks. It is a major liability component of a central bank's balance sheet. 2. What is reserve money? It is essentially the central bank's money . It is also called high-powered money , base money and central bank money . As per the definition, reserve money equals currency in circulation plus bankers' deposits
Read more

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli
Read more

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis
Read more

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l
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