Introduction of IFCI INFRASTRUCTURE BONDs for Tax savings u/s 80CCF

Key, features and notification of IFCI Infrastructure Tax Saving Bonds u/s 80CCF :

1. This bonds will be called “Long Term Infrastructure Bond”
2. New section can be availed by individual or HUF only.
3. An Individual or HUF can invest Rs. 20000/- in a Financial year to avail deduction under section 80CCF
4. Rs. 20000/- limit is in addition to 100000/- limit of section 80C, 80CCC, 80CCD
5. The effective tax saving arising on the investment would be 6,180/- (30% tax+ 3% education cess) for investors in highest tax bracket.
6. Tenure of the Bonds will be 10 Years.
7. However Lock in period is 5 years ,after 5 years investor can withdraw money from the bonds
8. After lock in period, Investor can take loan against these Bonds

Section 80CCF of the Income-tax Act, 1961 : – Deduction – In respect of subscription to long-term infrastructure bonds – Notified long-term infrastructure bond. Investments up to Rs.20,000 in a financial year are eligible for tax benefit

HIGHLIGHTS
Issuer
IFCI Limited(“the Issuer”)
Instrument
Long term Infrastructure Bond having benefits under section 80 CCF of the Income Tax, 1961
Tax Benefit
Maximum tax saving of Rs. 6,180/- by investing Rs. 20,000/- in Long Term Infrastructure Bond
Eligible Investors
Resident Indian Individuals who are major and HUF
Face Value
INR 5,000/- each
Minimum Subscription
1 Bond and in multiples of 1 Bond thereafter
Tenure
·         10 years, and
·         10 years with a buyback option after five years
Investment Options
The Bonds are proposed to provide the following options –
·         Option I – Non-cumulative and Buyback after 5 years
·         Option II – Cumulative and Buyback after 5 years
·         Option III – Non-cumulative and no Buyback
·         Option IV – Cumulative and no Buyback
Interest rate
7.85% – 7.95% p.a. as per option availed
Listing
Proposed to be listed on BSE
Minimum Lock-in
Five years
Issuance
Demat form only
Allotment Date
September 15, 2010

NOTE : Demat account is necessary to invest as bonds are only available in demat mode.

Available Options for investment in Infrastructure Bonds.
 

Options I II III IV

Buyback / Non Cumulative Option Buyback / Cumulative Option Non Buyback / Non Cumulative Option Non Buyback / Cumulative Option
Minimum Application / Face Value 5,000/- 01/05/00 5000/- 01/05/00
In Multiples of 01/05/00 5000/- 01/05/00 5000/-
Buy Back Option Yes Yes No No
Interest Payment Yearly NA Yearly NA
Coupon 7.85% per annum 7.85% to be compounded annually 7.95% 7.95% to be compounded annually
Yield on Redemption 7.85% 7.85% 7.95% 7.95%
Coupon Payment Date* September 15 every year NA September 15 every year NA
Redemption Date September 15, 2020 September 15, 2020 September 15, 2020 September 15, 2020
Buy Back Period Every Year Between August 16 to August 31, starting from Year 2015 till Year 2019 Every Year Between August 16 to August 31, starting from Year 2015 till Year 2019 NA

Redemption Amount (in case the buyback option is exercised)       

Options I II III IV

Buyback / Non Cumulative Option Buyback / Cumulative Option Non Buyback / Non Cumulative Option Non Buyback / Cumulative Option
Year 6 5000 7868/-
Year 7 5000 8486/-
Year 8 5000 9152/-
Year 9 5000 9871/-
Year 10 5000 10646/- 5000 10745

3 thoughts on “Introduction of IFCI INFRASTRUCTURE BONDs for Tax savings u/s 80CCF”

  1. How about these other two IPO and RBI Bond, Are they good?

    IPO : Gujarat Pipavav Port Ltd.

    Issue Opens on 26-08-2010 Lot Size: to be declared Price Band : to be declared

    RBI 8% taxable bonds

    8% P.A. for 6 Years Non-redeemable, Taxable, Non-transferable

  2. IFCI Infrastructure bonds are specifically beneficial on saving tax above the 1 lac limit of section 80c.

    Hence there is no substitute or alternative of IFCI Infra bonds as of today, though REC, IDBI & LIC are expected to launch their own Infrastructure Bonds in near future

  3. Thank you Harshit for your reply,

    I need some further information for IFCI Infra. bonds

    I have to pay my income tax with highest rate of 30% as I have yearly income more than 8lacs.

    I save Rs. 6,180/- by investing Rs. 20,000/- in Long Term Infrastructure Bond. Naturally, I have to invest Rs. 13,820 after saving tax.

    My questions are:

    My practical investment will be 13820, How much Rupees I will get after 5 years and 10 years?

    What will be the interest rate of return on Rs.13,820?

    Is there any more Tax Saving Bonds u/s 80CCF are upcoming? Should I go for this one or wait for new upcoming Bonds issue??

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