Power Finance Corporation (PFC) plans to raise Rs 5,300 crores through the Tax Saving Long Term Infra Bonds under Section 80 CCF from 24th Feb 2011 to 24th Mar 2011. These PFC bonds would be the last issuer to issue infrastructure bonds in this financial year. The bonds carry a interest rate of 8.30 per cent for 10 years and 8.50 per cent for the 15-year series. There is a lock-in period of 5 years for 10 years bonds and 7 years for 15 years bonds.
As per section 80CCF of income tax, an individuals can invest up to Rs 20,000 in these 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.
There are 2 investment options are available for these PFC Infra Bonds.
Option 1. Matuarity period for this is 10 years and interest can be have annually or cumulative at the rate of 8.30% p.a.
Option 2. Matuarity period for this is 15 years and interest can be have annually or cumulative at the rate of 8.50% p.a.
Issue Details :-
Issue Period : 24th February 2011 to 22nd March 2011
Rating : AAA / Stable by CRISIL and LAAA / Stable by ICRA
Issue Size : Rs 5,300 crore
Face Value : Rs 5,000 per Bond
Subscription Amount : Minimum 5 bonds
Lock-in Period : 5 years or 7 years
Listing : NSE/BSE
The Issue proceeds raised through these bonds will be utilised 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. These infrastructure bond issues are part of the government’s effort to mobilise money to part-fund the massive $1-trillion infrastructure spend it has planned for the Twelfth Plan.
IIFCL, IDFC and L&T Infrastructure Bonds are the some of the other infrastructure finance companies that have launched public issue of infrastructure bonds in recent days. While IIFCL is raising Rs 1,200 crore, L&T Infrastructure Finance is raising Rs 400 crore, which includes green-shoe option.
The Book running lead managers to the issue are ICICI Securities and SBI Capital Markets.
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.
Currenly available infrastructure bonds :-
1. PFC Infrastructure Bonds ( 24th Feb 2011 to 24th Mar 2011 )
2. IIFCL Infrastructure Bonds Tranche 1 ( 4th Feb 2011 to 4th Mar 2011 )
3. L&T Infrastructure Bonds 2011A Series ( 7th Feb 2011 to 7th Mar 2011 )
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