There has been a series of Infrastructure launches one after the other. L&T & IDFC had successfully closed their infrastructure bond isues and not its IFCI and REC (Rural Electrification Corporation Limited) Infrastructue Bonds. You can invest in the same upto Rs. 20,000 to save tax. Below are the details of the same.
|Face Value||Rs. 5,000/- per bond|
|Minimum Application||Rs. 5,000/- (i.e. 1 Bond)|
|Issue Schedule||Issue Open Date : December 19,2011|
Issue Close Date : February 10, 2012
|Options for Subscription||1||2||3||4|
|Frequency of Interest Payment||Cumulative||Annual||Cumulative||Annual|
|Coupon (% p.a.)||8.95 % p.a. (Annual compounding)||8.95 % p.a.||9.15 % p.a. (Annual compounding)||9.15 % p.a.|
|Maturity Amount||Rs. 5,000||Rs. 11,305||Rs. 5,000||Rs. 17,596|
|Tenor||10 years||10 years||15 years||15 years|
|Buyback option||At the end of 5 yrs+ 1 day||At the end of 5 yrs+ 1 day||At the end of 7 yrs+ 1 day||At the end of 7 yrs+ 1 day|
|Buyback Date||16 February 2017||16 February 2017||16 February 2019||16 February 2019|
|Maturity Amount (5 Yrs Buyback)||Rs. 7,677||Rs. 5,000||NA||NA|
|Maturity Amount (7 Yrs Buyback)||NA||NA||Rs. 9,231||Rs. 5,000|
|Lock-in period||5 years from the deemed date of Allotment|
|Issuance & Trading||Bonds shall be issued both in dematerialised form and physical form. However, trading allowed only in dematerialised mode after the expiry of Lock-in Period of 5 years|
Should you invest in REC Infrastructure bond 2011?
Rate of interest for PPF is 8.6% while in REC Bond you can lock-in your investment for 15 years at 9.15% interest. I think its the right time to invest in REC Infrastructure bonds.
Your returns would depend on the tax bracket you are. For details on the same Click here.
- If you are in 30% tax bracket your annual return would be 15.7% per annum
- while for 20% tax bracket your return would be 13.15% and
- for 10% tax bracket the returns would be 11.0%
I think its a decent return and its recommended to lock-in in such tax saving instruments at this high interest rate period.
Some significant points about investing in REC Infrastructure Bonds:
- No TDS would be deducted in these bonds.
- This would be listed on BSE and you can sell your bonds in secondary market at the end of 5 years
- The bonds shall be issued in both Demat and physical mode
- The maximum tax benefit you can get from this bond is Rs 20,000 under section 80CCF and this is in addition to the 1 Lac limit under 80C.
- These bonds may be mortgaged or pledged to avail the loans after the lock in period.
I suggest everyone in the higher tax bracket to subscribe to the Infrastructure bonds. You may subscribe to this REC bond or wait for other institutions to issue these kinds of bonds. But by the end of this financial year you must opt to save tax on additional Rs 20,000!