Rural Electrification Corporation (REC) is the state-run lender for utilities. Its a Navratna PSU company. The company plans to issue its latest Tax Saving Infrastructure Bonds under Section 80 CCF for subscription from 19th December 2011 and will be available upto 10th February 2011. These bonds have interest rates almost equal to other two recent issues namely IDFC and IFCI. The company has a greenshoe option to retain over-subscription for issuance of additional infrastructure bonds. The bonds carry a coupon rate of 8.95% for 10 years bonds and 9.15% for 15 years bonds. These REC bonds are redeemable, non-convertible long term infrastructure unsecured bonds having benefits under section 80 CCF of the Income Tax Act, 1961 for investment up to Rs 20000.
Issue Period : 19th December 2011 to 10th February 2012
Security : Unsecured
Issue Size : Rs 100 crore
Face Value : Rs 5000 per Bond
Subscription Amount : Minimum 1 bond
Lock-in Period : 5 years, 7 years.
Listing : Proposed to be listed on BSE/ NSE or both
There are four options to choose from for subscribers of these bonds.
|Option 1||Option 2||Option 3||Option 4|
|Face Value||Rs 5000 per Bond||Rs 5000 per Bond||Rs 5000 per Bond||Rs 5000 per Bond|
|Maturity Tenor||10 years||10 years||15 years||15 years|
|Lock-in Period||5 years||5 years||7 years||7 years|
The funds 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.
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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