Larsen & Toubro (L&T) has declared to float its first tranche of bonds for the year 2011-12. These are tax saving infrastructure bonds under section 80 CCF. Like IDFC Infra Bonds which are available in market right now these bonds too are offering 9% interest rate. The benefit under section 80 CCF is limited to Rs 20,000 in a financial year, but there is no limit on investment.
This is a new kind of tax saving option, introduced by finance minister last year and extended for this year too. Equity savvy investor never liked to invest in Infrastructure bonds and to encourage them to take part in Indian growth story these bonds are introduced. 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.
These bonds have interest rates of 9% p.a. for both series 1 and 2. In series 1 it is payable monthly and in series 2 it is accumulative and payable at maturity. Buy Back facility is available for these bonds but there is a intimation period of 9 months prior to buy back.
Bonds Summay :-
Issue Opens : 25th Nov. 2011.
Issue Closes : 24th Dec. 2011
Face Value : Rs 1000 per bond
Subscription Amount : Minimum 5 bonds
Mode of holding : Demat or Physical
Credit Rating : “AA+” From ICRA and CARE
Term of Maturity : 10 years
Lock in period : 5 years from date of allotment
Listing : These bonds will list on BSE after lock in period
These bonds are the fourth one this year 2011-12 after the IFCI, PFC and IDFC. Previous IFCI and PFC issues, were paying less interest. Now IDFC and L&T are offering 9% (0.5% extra) than IFCI and PFC issues and at the maturity value it will pay nearly Rs 700 more over period of 5 year per Rs 20000 investment. ICICI Securities, JM Financial and Karvy are the lead managers for 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. 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.
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