Tuesday, December 27, 2011

REC 80CCF Tax Saving Infrastructure Bonds 2011-2012: Review

Rural Electrification Corporation (REC) has also come out with an issue of long term infrastructure bonds which helps save tax on an investment of Rs 20000 under Section 80ccf. The face value of each bond is Rs 5000.

The issue opens on 19th December, 2011 and shall close on 10th February, 2012.

There are 4 options:
1. Interest Rate of 8.95% with maturity at 10 years and buyback option after 5 years. Interest will be calculated cumulatively and will be paid along with the principal.
2. Interest Rate of 8.95% with maturity at 10 years and buyback option after 5 years. Interest will be calculated and paid annually.
3. Interest Rate of 9.15% with maturity at 15 years and buyback option after 7 years. Interest will be calculated cumulatively and will be paid along with the principal.
4. Interest Rate of 9.15% with maturity at 15 years and buyback option after 7 years. Interest will be calculated and paid annually.

IFCI is another infrastructure bond issue which is open right now and is offering slightly higher interest rate than REC. Though the difference in interest rate is not that much so one can choose any one between these two options and get a tax benefit on Rs 20,000 under Section 80ccf.


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