Nov 202012

Deduction under Section 80CCF is not available for Asst. Year 2013-14.

80CCF Infrastructure Bonds

The better option with all the investors for fixed investments is available in the market to make savings on their capital and minimize the risk of returns on their investments. Nowadays investment in infrastructure bonds is becoming more of interest to people. Bond is issued by a company that has been authorized to sell these bonds in the market to the investors. The companies release these bonds among public which later investors subscribe these bonds. The investment made by public into these bonds is utilized for “Infrastructure Lending” as defined by RBI.  The investor receives returns on his investment into these bonds.

As per government’s notification number 50/2011 dated 09-09-2011, government has recently notified saying five types of companies would be considered valid for subscription of these bonds for 80CCF deductions.

1. The India Infrastructure Finance Company Ltd,
2. The Infrastructure Development Finance Company Ltd,
3. The Life Insurance Corporation of India,
4. The Industrial Finance Corporation of India and
5.  A Non-banking Finance Company (classified by Reserve Bank of India as Infrastructure Finance Company)

The above are the authorized sources that can issue infrastructure bonds. Minimum of ten years period is the tenure of the bond while the minimum lock-in period is of five years. The investor can keep his investment for 10 years but withdrawal of amount is possible only after 5 years. There is tax exemption under section 80CCF on an amount of Rs. 20, 000/- along with the benefit of Rs. 1,00, 000/- under section 80C.

The income earned on these infrastructure bonds is taxable. The buy-back facility is offered by all the issuers of these bonds after completion of 50% of the tenure.  Suppose after five years the rate of interest in the market is less the investor can choose to continue his investment till its maturity. If interest rates in the market are more than the interest rates on the bonds and the investor can sell off the bonds and start reinvesting his returns in a better form of investment. A tax payer would always prefer to invest in infrastructure bonds to save tax.  

The Demat Account is not mandatory but PAN Card is mandatory in order subscribe these bonds.