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Another avenue to save tax was introduced in the Budget 2010 in the form of section 80CCF. This section allows a deduction of Rs. 20,000 for investments made in Infrastructure Bonds. Recently, IFCI has come up with an issue of Long Term Infrastructure Bonds which are eligible for claiming deduction under section 80CCF. Here are a few facts which you must know to benefit from this newly introduced option of saving tax :
1. The deduction of Rs. 20,000 under section 80CCF is over and above the deduction of Rs. 1,00,000 available under section 80C, 80CCC and 80 CCD.
2. Investment in Infrastructure Bonds is specially beneficial for those who have already exhausted the Rs. 1,00,000 limit.
3. The benefit of saving tax through Infrastructure Bonds is available for Individuals and Hindu undivided families(HUF).
4. The face value of each bond is Rs. 5,000 and it is being issued at par value.
5. A minimum investment of Rs. 5,000 is required i.e. 1 bond and further investment can be made in multiples of 1 bond.
6. There is no upper limit on the amount of investment, however, a maximum of Rs. 20,000 only can be claimed as deduction as under section 80CCF
7. The tenure of the bond is 10 years
8. There is a lock in period of 5 years if you want to avail the tax benefits under section 80CCF.
9. The bond issue can be broadly classified into 2 categories
a. With a Buy back option
b. Without a Buy Back option
10. The Buy Back option will be available from 5th year onwards i.e. from 2015.
11. The Rate of Interest on bonds with a Buy Back option is 7.85% and for other then Buy Back option is 7.95%
12. Interest shall be taxable but there shall be no TDS.
13. These bonds are also available in Cumulative and Non-Cumulative options.
14. In case of Non-Cumulative bonds, the interest shall be paid annually and the bonds shall be redeemed at par
15. In case of Cumulative bonds, the maturity value shall be at par, along with the accumulated interest.
16. In order in invest in these bonds, you must have a demat account, as the allotment will be made in demat mode only.
17. Details provided in the application form should match with those of the demat account e.g. Name, PAN, DP name , DP id etc.
18. The application money should be paid through ECS,at par cheque or demand draft only, and not in cash.
19. 31st August, 2010 is the date on which the issue is closing i.e. the last date for investing in these bonds.
20. 15th September is the deemed date of allotment.
Investment in these Infrastructure bonds will not only provide you an extra tax saving avenue where you can claim deduction upto Rs. 20,000 and save tax amounting to Rs. 2,000-6,000, but will also earn an interest @ 7.85%-7.95% .
For obtaining a copy of the Application Form and Information memorandum visit www.ifciltd.com