Tax saving has become an integral part these days. More and more people are looking out to save taxes. Government is encouraging the activity which has dual benefits as the money received by this would be used for infrastructure financing and also enables savings by people. For this GOI came up with the concept of Infrastructure Bonds.
The concept of Infrastructure Bonds was coined last fiscal by RBI through a circular on February 12, 2010 through which they decided to introduce a category of NBFC as “Infrastructure Finance Companies” (IFC).
Investment in Infrastructure Bonds issued by IFC are exempt from tax up to Rs 20,000 under section 80CCF of income tax act. This exemption is in addition to Rs 1,00,000 exemption under section 80C.
Benefits: By investing in these bonds, you can get a deduction of Rs 20,000 over and above the Rs 1 lakh that is generally allowed. (u/s 80 CCF)
Returns: Most of these bonds provide with 9% annual interest. Offered in both cumulative and non-cumulative mode.
With yields on government securities beginning to moderate, interest rates (which are linked to gilt yields) on future bond issues may not be as high as the current ones. Already, rates on the current tranche of issues are lower than what was offered a month or two ago.
This makes the bonds a good option if you have not already exhausted the Rs 20,000 limit by investing in previous bond offers.
To get the maximum benefit, go for the cumulative option. This option accumulates interest instead of paying it out every year. This means interest gets re-invested at the bond`s coupon rate.
IDFC, L&T, SREI & REC Infra have launched their tax saving long term bonds issue which offer high safety and attractive long term yields.
Disclaimer – Please read all scheme information documents/prospectus before investing.
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