There is an additional opportunity for you to save tax on Rs. 20,000/- of taxable income by investing in Infrastructure Bonds u/s 80CCF. This is over and above the limit of Rs. 1,00,000/- of investments that qualify for tax rebate u/s 80C. An investment of Rs. 20,000 would get you maximum tax exemption of Rs. 2,060/- (if your current tax rate is 10.3%), Rs. 4,120/- (if your current tax rate is 20.6%) and Rs. 6,180/- (if your current tax rate is 30.9%).

IFCI (Sr IV) and L&T (2011 B Series, Tranche-1) has come out with their public offering of Infrastructure bonds u/s 80CCF. L&T Infrastructure bonds have slightly better rating than IFCI.

IFCI:

The bonds have a face value of Rs. 5000. A minimum of one bond applications is to be made, and in multiples of one bond thereafter. The bonds have a maturity period of 10 years or 15 years (depending on the series) and an initial lock in period of 5 years.

There are 4 options of investment in these bonds.
Series 1: Offering 9.09% cumulative coupon with a maturity of 10 years and a buyback after 5 years.
Series 2: Offering 9.09% annual coupon with a maturity of 10 years and a buyback after 5 years.
Series 3: Offering 9.16% cumulative coupon with a maturity of 15 years and a buyback after 7 years.
Series 4: Offering 9.16% annual coupon with a maturity of 15 years and a buyback after 7 years.

The issue is currently open and closes on 16th January, 2012.

L&T:

L&T offers two series. Series 1 has interest rate of 9% payable annually. Series 2, the interest rate is 9% but compounded annually payable at the end of maturity. The maturity is 10 years from the deemed date of allotment. At the end of 10 years, the maturity amount shall be Rs. 2367.36 for every Rs. 1000/- invested.

The bonds have lock in period of 5 years from the date of allotment. It has three exit options which includes buyback after 5 years, or 7 years, and 10 years (which is at the time of redemption). If you go for buyback option after 5 years, you will get Rs. 1,538/62, and after 7 years you will get Rs. 1,828/04, for every Rs. 10,000/- invested.

The issue is currently open and closes on 24th of December, 2011.

If you fall in the tax slab of 30.90%, the effective yield on the 10 yr L&T bonds shall be 13.02% ( taking into consideration the amount of tax you save), whereas for 10 yr IFCI bonds the effective yield shall be 13.26%.

Both the bond are proposed to be listed on the BSE. After the lock in period of 5 years, trading is permitted, but in dematerialized form only. HUF can also apply for these bonds under the name of Karta. Documents required are:
1) Self-attested copy of PAN card.
2) Self-attested copy of residence proof.
3) Canceled cheque of the bank account to which the amounts pertaining to payment of refunds, interest and redemption applicable is to be credited.

Kindly note that if you need funds in the interim period, you cannot pledge or hypothecate these bonds and and there is no exit before the lock in period.

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