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

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...
Read more

BHIM App

What is BHIM? BHIM stands for Bharat Interface for Money , which is an easy way of transferring money from one bank account to an other via a smartphone using the Unified Payments Interface (UPI) platform . It is an instant payments application meant for sending money as well as requesting for payments. How is it different from UPI? BHIM is no different than UPI. But in the case of BHIM, customers don't have to download mobile applications of multiple banks, instead a single BHIM app downloaded from Android Play Store is sufficient. Other than that, payments can be made through a virtual payments ID or through account number and IFS code, same as UPI. What you need to use BHIM? BHIM can be used across an droid smartphones with version 4.0 and above, also it will be made available on iPhones and Windows smartphones very soon. Further, for feature phone users they need to use the USSD feature by dial ing *99#. Why was the need for BHIM felt when UPI is already in place? With various...
Read more

NPS for Tax Saving

The NPS is a great way to save tax if you don't mind locking in your money till you retire. Till last year, the taxability of the NPS was a big issue. But last year's Budget changed the rules and made 40% of the corpus tax free. The PFRDA wants that the balance 60% to be exempt from tax as well. The emphasis is on increasing pension coverage. So, allowing EEE status (to NPS ) is our major demand (in the Budget NPS is especially useful for investors who may have exhausted the `1.5 lakh investment limit under Section 80C but want to save more.   Another way the NPS can cut tax is by rejigging the salary.If a company deposits up to 10% of the basic salary of an employee in the NPS under Section 80CCD(2d), the amount will be tax free. Turn to page 28 to see how much tax this can save. However, the take-home pay of the employee will come down. Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 10 Tax...
Read more

SBI Long Term Advantage Fund Series

Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 10 Tax Saver Mutual Funds for 2017 - 2018 Best 10 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. ICICI Prudential Long Term Equity Fund 5. Birla Sun Life Tax Relief 96 6. Franklin India TaxShield  7. Reliance Tax Saver (ELSS) Fund 8. BNP Paribas Long Term Equity Fund 9. Axis Tax Saver Fund 10. Birla Sun Life Tax Plan Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave your comment with mail ID and we will answer them OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com OR Call us on 94 8300 8300  
Read more

ELSS Funds are Best Tax Saving Option

Equity-linked saving schemes (ELSS) are the best way to save tax in 2017 . The Economic Times assessed 10 tax-saving options on eight key parameters, including returns, safety , liquidity , costs, transparency , flexibility , ease of investment and taxability of income. ELSS funds scored highest, followed by the National Pension System (NPS) and Ulips at the second and third place, respectively . The terrific returns generated by ELSS (CAGR of 18.7% in past three years and 17.46% in past five years) are not the only plus point of these funds. Their costs are very low (2.52.75% a year) and all charges, portfolios and transactions are in the public domain. Returns are tax free because long-term capital gains from equity funds are exempt and they have the shortest lock-in period of three years. Investing in ELSS funds has now become very easy with the launch of the e-KYC facility . The whole process does not take more than 30-35 minutes. The Pension Fund Regulatory and Development Aut...
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