First tranche of the L&T Infrastructure Bonds came in the market on 15th October 2010 and was available for subscription up to 2nd November 2010. Now again L&T Infrastructure Finance Company Limited has come up with their second tranche of Infra Bonds and the issue is going to open on 7th Feb 2011 and will be available for subscription up to 7th Mar 2011. The issue size of this second tranche is Rs 100 crore. Offering a interest of 8.20% per annum in the first series (series I) which can be redeemed after 5 years and 8.3% in the second series or (series II) can be redeemed after 7 years.
There are 2 investment options are available for these L&T Infra Bonds.
Option 1. Matuarity period for this is 10 years and interest can be have annually or cumulative at the rate of 8.20% p.a. with a buyback option at the end of 5 years and at the end of 7 years.
Option 2. Matuarity period for this is 10 years and interest can be have annually or cumulative at the rate of 8.30% p.a. with a buyback option at the end of 5 years and at the end of 7 years.
Issue Details :-
Issue Period : 7th Feb 2011 to 7th March 2011
Rating : “AAA” by ICRA and CRISIL
Issue Size : Rs 5000 crore
Face Value : Rs 1000 per Bond
Subscription Amount : Minimum 5 bonds
Term : 10 years
Lock-in Period : 5 years
Listing : NSE/BSE
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.
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 for those 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:- Yield would be very low for those who are not in Highest tax slab. The bonds are locked in for five years, so there is no exit in case you need the money midway which restricts liquidity.
After lock in period is over, you have buy back option from the bond issuer. These bond can also be traded in stock Exchange.
