There is a new kind of tax saving option is introduced by finance minister this financial year and that is Section 80CCF. Equity savvy investor never liked to invest in Infrastructure bond and to encourage them to take part in Indian growth story and at the same time save some income tax too. According to the proposal, 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.
IFCI Infrastructure Finance Company Limited plans to raise Rs 100 crores with a greenshoe option to retain over-subscription for issuance of additional infrastructure bonds. The bonds have a face value of Rs 1,000 with 10 years maturity. There is a lock-in period of 5 years from the date of allotment. Earlier, IFCI raised about Rs 100 crore, including a greenshoe option of Rs 50 crore. But unlike the other IDFC bond, which has a triple A rating and L&T , which has a AA+, IFCI bonds are unrated.
Issue Details :-
Issue Period : 16th November 2010 to 30th December 2010
Rating : “unrated” by ICRA
Issue Size : Rs 100 crore with a greenshoe option to retain over-subscription for issuance of additional infrastructure bonds.
Face Value : Rs 1000 per Bond
Subscription Amount : Minimum 5 bonds
Lock-in Period : 5 years
Listing : NSE/BSE
Buyback Option : At the end of 5 yrs and 7 yrs from the date of allotment
The 10-year bonds are offered under four options:-
Option I, which comes with a buyback after five years, offers yield on redemption of 8% per annum.
Option III, without the buyback option, will offer 8.25%. Both will be non-cumulative .
Option II and Option IV will have cumulative payment at the end of the buyback period, or 10 years, as per the option opted by the investor.
The funds raised through this issue 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.
The maximum amount of income not chargeable to tax in case of individuals (other than women assesses and senior citizens) and HUFs is Rs 1,60,000. In the case of women, the limit is Rs 1,90, 000 and in the case of senior citizens, it is Rs 2,40,000 for FY10.Hence those guys whose income exceeds these slabs can go for these bonds.
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.
IDFC officials have recently said they will float a second batch of taxsaving infrastructure bonds by March 2011 as it aims to mop up a total Rs 3,400 crore through these longterm bonds. It has already raised Rs 436 crore from the first tranche, which closed on October 25. IDFC was followed by L&T Infrastructure Finance, which raised about 240 crore.Google+