IDFC Infra Structure Bonds


Tax payers can start investing in savings to avail income tax benefits:
The limit for maximum deduction available under Sections 80C, 80CCC and 80CCD (combined together) is Rs. 1,00,000/- (Rs. one lac only). An additional deduction upto a maximum of Rs. 20,000/- will be available from Assessment Year 2011-12 (FY 2010-11) for investment in Infrastructure Bonds under Sec.80 CCF.

Now Infrastructure Development Finance Company (IDFC) has opened the sale of infrastructure bonds from 30.09.2010 which will be available upto 18th October 2010. Each bond has value of Rs.5000/-.
There will be 4 series of issue. Series no. 1, 2.3 and 4.

Minimum number of bonds per application: 2 bonds and multiple of one bond thereafter. Applicant can select different series within 2 bonds.

Interest payment: Annual
Interest rates; For series 1, 8% interest payable annually. Non-cumulative and investment period is 10 full years. No buy back facility. Maturity amount after 10 years will be Rs.5000/- as interest is paid periodically.
For series 2, Cumulative and buyback offer after five years. The maturity amount will be Rs.10800/- per bond after 10 years. Rate of interest 8%.

For series 3, interest rate is 7.5% payable annually. Non-cumulative . Buyback facility is there. Maturity amount will be Rs.5000/-.

For series 4, cumulative and buyback. The maturity amount will be Rs.10310/- after 10 years from deemed date of allotment. Interest rate is 7.5%.. Buy back amount after 5 years is Rs. 7180/-.
The investor would need a demat account and pan card to invest in these bonds. The bonds will not attract any TDS. The interest accrued on the bonds will be credited in the respective bank registered with the demat account through ECS on the due date for interest payment.

The bonds will be listed on NSE/BSE after 5 year lock in period. Investors can mortgage or pledge these bonds to avail loan after the lock in period.

ICRA had given a credit rating of LAAA for the issue. ‘L’ in the rating indicates long term bond and ‘AAA’ indicates highest quality (similar to Central Government bonds).
Effective Interest rates due to income tax benefit:

Investment Amount Tax Slabs
20000 Series 1 Series 2 Series 3* Series 4*
30.90% 13.89 12.06 17.19 15.74
20.60% 11.57 10.52 13.41 12.57
10.30% 9.64 9.18 10.23 9.86

Investors need to pay the entire subscription amount at the time of submitting applications. If investor is not allotted any bonds/ or partially allotted the company would refund the money. Selected banks/brokers handle this issue.

C. R. Venkata Ramani

(AICWA)

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