Thursday, March 22, 2012

IDFC 80ccf Tax Saving Infrastructure Bond (Tranche 3) 2011-2012

IDFC has come out with the third tranche of tax saving long term infrastructure bonds. IDFC came out with the first tranche in November, 2011 and second tranche in January, 2012. The face value of the each bond is Rs 5000.

Tax Benefit:

Investors will get tax benefit on Rs 20,000 under Section 80ccf of the Income Tax Act, 1961. This is additional tax benefit over Rs 1 Lac under Section 80c.

Opening and Closing Date:

The issue shall open on 19 March, 2012 and shall close on 30 March, 2012.

Yield:

IDFC offers 8.43% interest rate with two options:

  • Annual in which interest will be paid annually 
  • Cumulative in which interest will be paid along with principal at maturity 

Maturity:

Maturity period is 10 years with buyback option after 5 years. The bonds can be traded on NSE or BSE also after 5 years.

Credit Rating:

Both ICRA and Fitch have rated these bonds as AAA.

Recommendation:

Even though the first and second tranche of the IDFC infrastructure bond offered higher interest rate, we would still recommend this for those investors who did not invest in long term infrastructure bonds for the current financial year. This is the only issue open now and may very well be the last for this financial year. So, last option to save tax on Rs 20,000 in addition to Rs 1,00,000 under section 80c. Also, tax benefit on long term infrastructure bond under section 80ccf has been removed as per the latest budget so this tax benefit will not be available next year.


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