Sunday, December 11, 2011

Infrastructure Bonds ARE Back in Action!!

 The additional tax benefit provider (sec 80CCF) in form of Infrastructure bonds…let us see how they fare and which company bond to invest.

A spate of Infra Bonds have hit the markets in the recent weeks and much more are expected.
After IDFC and L&T, IFCI has now come out with a Infrastructure Bond which allows deduction under section 80ccf.

Compared to other two bond issues, IFCI definitely scores better because of its higher interest yield.

IFCI which had already come with 1st Tranche has come out again, albeit with a much higher interest rate now.

Compared to other two bond issues, IFCI definitely scores better because of its higher interest yield.

With this Bonds, you get an additional 20000 Tax Benefit over and above the 1 lakh under Sec80c.

The Bonds will be listed on BSE after the mandatory lock in of 5 years, thus giving you the required liquidity.

And, thankfully, no TDS will be deducted.

These Infra bonds typically have a lock in of 5 years and later on are listed on Stock markets wherein you can sell.

Moreover, all the Bond issuers also give the option of buyback facility.

You can make use of the same depending on the Interest rate scenarios at that time.

I strongly urge to make maximum use of this facility and take advantage of this benefit.

On an investment of Rs.20k, an individual in the Top Tax Bracket of 30% can make a saving of Rs.6000 and also earn an interest of 9% to 9.09% which, however, for the Highest Bracket Tax Payer, the effective yield works out to more than 13%…..

If you have observed last year, interest rate on the bonds kept on increasing for every issue, but this is unlikely to happen this year as the Interest rates are at their peak and the RBI has already indicated that the interest rates could be moderated.

This will ensure that the coming issues will be priced at similar rate of interest rates or in fact, even lower.

Better to lock in the higher interest rates with the IFCI Infastructure Bond.

Those Tax payers who have exhausted their Exemption for Investments of Rs.1 lakhs in Sec 80c, 80ccc, 80ccd can look at these Infra Bonds.

With interest rates at the peak, this is the right time to invest in these bonds rather than waiting for further issues wherein the interest could be lesser.

Invest now. The earlier the better.

Srikanth Matrubai

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1 comment:

  1. The Offering from IFCI will be closing on 16th Jan 2012.
    Thanks for the Informative Article. IFCI is one of the oldest financial institution in India.


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