BUDGET 2010 saw the Finance Minister doling out sops to push infrastructure investments in the country. One key sop - the tax benefit to individuals on investment of up to Rs 20,000 in infrastructure bonds under section 80CCF. And this, over an above the current limit of Rs 1 lakh that section 80C provides.
The Central Board of Direct Taxes (CBDT) has now notified New Infrastructure Bonds. An individual or Hindu Undivided Family (HUF) can invest in these new infrastructure bonds up to Rs 20,000 in a financial year. LIC, IFCI, IDFC and other NBFCs classified as Infrastructure Company by RBI will be allowed to issue these bonds, called Long Term Infrastructure Bonds.
The minimum application amount for these bonds is Rs 5,000 and multiples thereof for each option.
The issue opens on August 9, 2010 and closes on August 31, 2010.
Features of the bond:
- The bonds will be of 10 year tenure
- The minimum lock in period for an investor shall be five years. After 5 years the investor may exit either through the secondary market or through a buyback facility, specified by the issuer in the issue document at the time of issue.
- Permanent Account Number is must to apply these bonds.
- These infrastructure bonds are not tax free. Interest on these bonds is taxable in the hands of investor, however, no TDS is deducted from interest.
- A demat account is mandatory to apply; any application without demat account details would be rejected. Submitting an attested pan card copy of the first holder is also compulsory while applying.
- The coupon rate for the bonds is as follows:
| Options | I | II | III | IV |
|
| Buyback / Non Cumulative Option | Buyback / Cumulative Option | Non Buyback / Non Cumulative Option | Non Buyback / Cumulative Option |
| Minimum Application / Face Value | 5,000/- | 5,000/- | 5000/- | 5,000/ |
| In Multiples of | 5,000/- | 5000/- | 5,000/ | 5000/- |
| Buy Back Option | Yes | Yes | No | No |
| Interest Payment | Yearly | NA | Yearly | NA |
| Coupon | 7.85% per annum | 7.85% to be compounded annually | 7.95% | 7.95% to be compounded annually |
| Yield on Redemption | 7.85% | 7.85% | 7.95% | 7.95% |
| Coupon Payment Date* | September 15 every year | NA | September 15 every year | NA |
| Redemption Date | September 15, 2020 | September 15, 2020 | September 15, 2020 | September 15, 2020 |
| Buy Back Period | Every Year Between August 16 to August 31, starting from Year 2015 till Year 2019 | Every Year Between August 16 to August 31, starting from Year 2015 till Year 2019 | NA | NA |
| Redemption Amount (in case the buyback option is exercised) & final redemption amount at the end of 10 years. | ||||
| Year 5* | 5000 | 7296/- | - | - |
| Year 6* | 5000 | 7868/- | - | - |
| Year 7* | 5000 | 8486/- | - | |
Next page: Frequently asked questions on the issue
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