The finance minister announced a new income tax section — 80CCF — which entitles a tax payer to exemptions on money invested in infrastructure bonds.On an investment of Rs 20,000, an individual in the 30% tax bracket can save Rs 6,000 of tax and earn an annual interest of 7.85-7.95%. So, it is a double benefit.the bonds will have a minimum tenure of 10 years, and investors will be locked in for five years.
IFCI has already begun a private placement of unsecured redeemable, non-convertible long-term infrastructure bonds of up to Rs 20,000 for this financial year. The interest rate is 7.85% for buyback option and 7.95% for non-buyback option, under cumulative and non-cumulative (September 15 yearly) interest schemes. However, under the 7.85% bonds with a buyback option, the investor can redeem the bonds after the fifth year. The buyback starts from 2015 to 2019. The 5-year lock-in is compulsory to avail of the 80 CCF benefit.Those who have already exhausted their annual tax savings limit of Rs 1 lakh will be keenly looking at these bonds. The exemption for investments in infrastructure bonds is in addition to the investments of Rs 1 lakh in tax-saving instruments under Section 80C, 80CCC, 80CCD. After the lock-in period, an investor can take loans against these bonds.
IFCI infrastructure bond is closing on december 31 2010. It is a very good opportunity to claim tax exemption on additional Rs 20,000. Infra bond is better option than SIP for 5 years.
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