The Central Government have specified bonds to be issued by

(i) Industrial Finance Corporation of India;( IFCI )

(ii) Life Insurance Corporation of India; (L I C)

(iii) Infrastructure Development Finance Company Limited; and ( I D F C)

(iv) a Non-Banking Finance Company classified as an infrastructure finance company by the Reserve Bank of India; as “Long-term Infrastructure Bond” for the purpose of section 80CCF of the Income Tax Act, 1961.

Investment in these bonds up to rupees twenty thousand will be eligible for deduction from the total income of the assesses. The deduction will be in addition to the deduction of rupees one lakh allowed under sections 80C, 80CCC and 80CCD of the Act.

The tenure of the Bonds shall be a minimum of ten years with a lock-in period of five years for an investor. It will be mandatory for the subscriber to furnish permanent account number to the issuer for investment in the bonds.

My view: If I have to take a 10 year view without any doubt it is only LIC on which I will take a 10 year risk call. So wait for LIC to come out with an issue. Be patient, be sane, if you want the tax break fill up the form or forget it.

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  1. subra, can you put some more light on utility of infra bonds for people from different tax brackets.

    would be a great help.

    Also why only LIC ? any specific reasons?

  2. 6000 rs gain for someone in the 30% bracket. 2000 for those in 10%.

    10% return (savings) upfront for the 10% taxpayer -plus the coupon rate for the next 10 years.
    30% return for the 30% tax coupon rate for the next 10 years. assuming the coupon rates are fixed and set at 8 or less percent, it may or may not beat inflation. but the 30% savings upfront is attractive to those in 30% bracket.i would skip it if i were in 10% bracket -too much opportunity cost for a 10 year lock up.

  3. Do you think its worth to invest in infrastructure bond that to with a lock-in period of 5 years ? What will be average returns on the same ? For 20,000 amount invested, i may get 2000 tax rebate………. Do you think its worth ???? What i personally feel is that if i invest the same Rs.20000 in a mutual fund / equity for 1-2 years, i may get around 3000- 4000 returns for 2 years that to without a lockin period…….. What’s your opinion ?????????

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