Finance Minister Pranab Mukherjee has extended the tax benefits of section 80CCF for one more year. Under this section of Income tax an individual can invest up to Rs 20,000 in long term infrastructure bonds in addition to the Rs 1 lakh limit available under Sections 80C, 80CCC and 80CCD such as life insurance premium, provident fund, PPF and National Savings Certificate. This special section 80CCF was schedule to over this year but finance minister has given another chance to tax payers to take part in Indian growth story and at the same time save some income tax too.
The funds raised through these bonds is utilized towards “infrastructure lending” as defined by the RBI in the regulations issued by it from time to time, after meeting the expenditures of, and related to the issue.
Tax Benefits :- Under section 80CCF of the Income Tax Act, Rs 20,000 per annum paid or deposited as subscription to long term infrastructure bonds shall be deducted in computing the taxable income. This is over and above Rs 1,00,000 tax benefit available under section 80C, 80CCC and 80CCD.
Benefits as per Tax slabs :-
1. Slab 10.3% : Rs 2,060
2. Slab 20.6% : Rs 4,180
3. Slab 30.9% : Rs 6,180
Pros:- The limit of Rs 20,000 per annum is in addition to Sections 80C, 80CCC and 80CCD. Hence, it is advisable to consider applying in this issue.
Cons:- The bonds are locked in for five years, so there is no exit in case you need the money midway which restricts liquidity.