Tax saving long term infrastructure bonds have come in market again. The first infrastructure bond was from IFCI which opens just few days back. Now Power sector lender Power Finance Corporation (PFC) plans to raise Rs 200 crores through the Tax Saving Long Term Infra Bonds under Section 80 CCF from 29th Sep 2011 to 4th Nov 2011. The bonds carry a interest rate of 8.50 per cent for 10 years and 8.75 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.
Power Finance Corporation (PFC) plans to raise Rs 6,900 crore in FY2011-12 and it will be in tranches. Any oversubscription above Rs 200 crore will be absorbed through the green-shoe option in this first issue. The bonds are priced at Rs 5,000 each and can be held in both physical and demat formats.
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 that comes under tax exemption bracket. Long term infra bonds are useful tools to save tax under section 80CCF of Income Tax Act.
There are 2 investment options are available for these PFC Infra Bonds.
Option 1 :- Matuarity period for series 1 and 2 is 10 years and interest can be have annually or cumulative at the rate of 8.50% p.a.
Option 2 :- Matuarity period for series 3 and 4 is 15 years and interest can be have annually or cumulative at the rate of 8.75% p.a.
Issue Details :-
Issue Period : 29th September 2011 to 4th November 2011
Rating : AAA / Stable by CRISIL and LAAA / Stable by ICRA
Issue Size : Rs 200 crore
Face Value : Rs 5,000 per Bond
Lock-in Period : 5 years for 10 years bonds and 7 years for 15 years bonds
Listing : The bonds will be listed at BSE and can be traded only after completion of 5 years
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.
Power finance corporation (PFC), is a Govt Of India undertaking institute engaged in project finance of power and energy sector.PFC is actively engaged in finance of power plants,Hydroelectric and wind energy plants and various projects envolving generation,distribution and transmission as well as for renovation & modernization of existing power plants,along with consulting assignments of power sector.
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.
For Demat mode:- Cheque and self attested copy of pan card. Bank account ,nominee details will be picked from registry of demat account. Interest,refund or maturity amount will be credited in bank account linked with your demat account.
For Physical mode:- Cheque and Self attested copy of pan card , address proof and cancelled copy of cheque.
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