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Infrastructure bonds are making a splash these days just in time before the end of the tax-saving season in March. Currently, issues are open for subscription from Infrastructure Finance Corporation of India (IFCI), Rural Electrification Corporation (REC), PTC India Financial Services and SREI Infrastructure Finance. IDFC has already raised Rs 533 crore through its issue of infrastructure bonds which closed for subscription in December 2011.
The company is likely to come up with its next tranche of these bonds soon. You can invest up to Rs 20,000 in these bonds and claim tax deduction under Section 80CCF. If you are in the highest tax bracket, you can save as much as Rs 6,180 by investing in these bonds.
"The Rs 20,000 limit for investment in infrastructure bonds is in addition to the 1 lakh tax deduction limit available under Section 80C and hence merits investment. You can choose an issuer of these bonds based on the credit rating, interest rates offered and the financial credentials of the company", says K Ramalingam, director and chief financial planner, Holistic Investment Planners.
The common elements
All issues have tenures of 10 years and 15 years. There is a buy-back option at the end of five years from the date of allotment, and liquidity will also be offered by listing the bonds on the stock exchange once the mandatory lock-in period of 5 years is over. While the buy-back facility for the 10-year bonds is after 5 years, for the...