Save taxes with IFCI Infrastructure Bonds 2011

IFCI infrastructure bond 2011IFCI is once again out with infrastructure bonds – IFCI Tax Saving Long Term Infrastructure Bonds–Series III. You can invest in the same upto Rs. 20,000 to save tax. Below are the details of the same.

 Rating‘BWR AA-‘ by Brickwork Ratings India Pvt. Limited CARE‘A+’ by CARE Ratings (Credit Analysis & Research Ltd.) ‘LA’ by ICRA Limited
 Face ValueRs. 5,000/- per bond
 Minimum ApplicationRs. 5,000/- (i.e. 1 Bond)
 Issue ScheduleIssue Open Date : September 21,2011

Issue Close Date : November 14, 2011

 Options for Subscription IIIIIIIV
 Frequency of Interest Payment CumulativeAnnualCumulativeAnnual
 Coupon (% p.a.) 8.50 % p.a. (Annual compounding)   8.50 % p.a. 8.75 % p.a. (Annual compounding) 8.75 % p.a.
 Tenor 10 years10 years 15 years  15 years
 Maturity DateDecember 12, 2021 December 12, 2021December 12, 2026December 12, 2026
 Buyback option YesYesYes Yes
 Lock-in period5 years from the deemed date of Allotment
 Deemed Date of AllotmentDecember 12,2011
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 IFCI Infrastructure bond 2011?

Rate of interest for PPF is 8% while in IFCI Bond you can lock-in your investment for 15 years at 8.75% interest. I think its the right time to invest in IFCI Infrastructure bond Series III.

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 15.3% per annum
  • while for 20% tax bracket your return would be 12.8% and
  • for 10% tax bracket the returns would be 10.6%

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 IFCI 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.

To Conclude:

I suggest everyone in the higher tax bracket to subscribe to the Infrastructure bonds. You may subscribe to this IFCI 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!

2 thoughts on “Save taxes with IFCI Infrastructure Bonds 2011”

  1. I just got suoeris about including many more passive income streams… I am going to consider this, for sure. Thanks for the break down.

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