In the current financial year a new kind of relief has been announced which has never appealed to equity savvy investor which is Investment in Infrastructure bond under Section 80CCF. 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.
Entities like LIC , IDFC, IFCI can also issue these bonds or any other NBFC as classified by the RBI can even do this. Lately in September, IFCI issued these bonds on a private placement basis, and now, IDFC has decided to offer the first tranche of these bonds to the public. It plans to raise Rs 3,400 crore through such infrastructure bonds in one or more tranches during FY11. The government of India is IDFC’s single largest shareholder and it provides a range of financing solutions to the infrastructure segment in India.
IDFC offers four different types of investment options too. The face value of each bond is Rs 5,000 and one can apply for a minimum of two bonds and in multiples of one bond thereafter. All the four options have a tenure of 10 years and a lock-in of five years. After five years, one can sell series 1 and 2 on the stock exchanges. And at the end of five years, IDFC offers a buy-back facility for option 3 and 4. While series 1 and 2 offer an annual interest rate of 8%, series 3 and 4 offer an interest rate of 7.5%.
As far as interest is concerned series 1 and 3 give provide it on an annualised basis, whereas series 2 and 4 give interest on a cumulative basis. The bonds shall be issued in the demat form only, and it is mandatory to have a demat account to apply for the same. The issue closes on October 18, 2010. 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 whose income exceeds these slabs can go for these bonds.
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
