Section 80CCF Infrastructure Bonds FAQ

by Manshu on December 9, 2010

in Tax

I’ve fielded a lot of questions on the Section 80CCF Infrastructure bonds, and while I’ve written individual posts on the infrastructure bonds that have so far come out under this section, there is nothing on this section itself, so I’m going to address some common questions about  Section 80CCF with this post.

It goes without saying that all these questions have popped up in the comments section at one time or the other (well, not the first one).

Is 80CCF a new Space Shuttle?

I wish it were, but it’s not even remotely as cool as that. In fact, it’s just a new section that allows Non Banking Financial Companies (NBFCs) to issue infrastructure bonds, and investors who invest money in these bonds can get an additional tax benefit.

What is the additional tax benefit under 80CCF?

All of you know that you can reduce your taxable income by investing in certain instruments like tax saving fixed deposits, or tax saving mutual funds, but the limit on the deduction from your taxable income is Rs. 100,000.

So, if you invest Rs. 150,000 in tax saving mutual funds – the tax benefit will be capped at Rs. 100,000.

Section 80CCF allows you to invest an additional Rs. 20,000 in infrastructure bonds, and have that reduced from your taxable income in addition to the Rs. 100,000 deduction you get from the other instruments.

Section 80CCF Infrastructure Bond FAQs

Section 80CCF Infrastructure Bond FAQs

Will I get the tax benefit every year, or just one year?

You will get the tax benefit only in the first year, which means that if you buy bonds worth Rs. 20,000 in this year – Rs. 20,000 will be deducted from your taxable income while calculating tax this year

There is no tax benefit from next year onwards.

I have  a tax liability of Rs. 12,000 – will that become zero if I buy bonds worth Rs. 12,000?

No, that’s not how they work. Buying the bonds will not lead to a reduction in the tax paid by reducing that amount from your tax burden.

The benefit comes from reducing your taxable salary by the amount of your investment, so that the final tax burden is reduced.

Is there TDS on the interest?

For bonds that are issued only in electronic format there is no TDS, however that doesn’t mean that there is no tax on them.

Is the interest from these bonds tax free?

While there may be no TDS on the interest on these bonds, they are taxable, and the interest will be added to your income, and it will be taxable.

Do I need a Demat Account to invest in these infrastructure bonds?

Every bond issuer has different terms, and it depends on what their terms of issue are, but the IFCI issue is open only for Demat account holders, while the IDFC and L&T issues were available to people who wanted to subscribe via physical form as well.

Will these 80CCF bonds be listed on a stock exchange?

Yes, the bonds will be listed on a stock exchange, however they come with a lock in period, and you can’t sell them before the lock in period. For example, the IDFC bond had a lock in period of 5 years, so you can’t sell these bonds within 5 years, but once they list you will be able to sell them.

I missed the existing issues, will there be new infrastructure bond issues?

Yes, there are going to be more 80CCF infrastructure bond issues in the future, and if you missed the earlier ones, there is still a chance to get these bonds.

What tax proof will I get if I applied for the infrastructure bond in dematerialized form?

You will get allotment advice in the mail that you can use for tax proof, and if you haven’t received the proof then some people have been advised that they can use the copy of their Demat holdings to show that you own the bonds.

Can NRIs invest in Section 80CCF bonds?

The bonds that have been issued so far haven’t allowed investments from NRIs, and I think there might be some clause which limits NRIs from investing in these bonds.

Since I need a Demat account to buy these bonds, will I need a broker to exercise the buyback option?

You won’t need a stock broker to exercise the buyback option. In the case of IFCI you can write to them and ask them to exercise the buyback, and in the case of IDFC and L&T they can exercise it by buying it back from you and crediting your bank account, so you don’t need a broker.

You will need a broker if you decide to sell it on the exchange though.

When will I receive the physical allotment advice letter, and when will I start seeing them in my Demat account?

This is a question that has been tormenting a lot of people because the companies issuing these bonds don’t bother to communicate when the bonds will be allotted or when they will send the allotment advice letter.

No one can say for sure if the company doesn’t communicate this, but I’ve seen that the past couple of issues have taken about 3 – 4 weeks from closing of the issue to credit the bonds, and then an addition 2 or 3 weeks for the letter to arrive.

How are the yields for these bonds calculated?

This question is a bit more involved, and I have done full posts on how yields for tax saving bonds are calculated, as well as the limitations of the method used to calculate them and you can go through these posts to understand this better.

How can I keep track of these 80CCF infrastructure bond issues?

I have created this post with the calendar of 80CCF bond issues, and you can check that periodically to see if there are any new issues. This will also be widely reported in news articles, so it’s quite likely that you come across them in your daily reading.

Any other questions?

I’ve tried to cover all questions that I see pop up frequently, but if you have any other questions feel free to leave a comment, and I will try to answer them.

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{ 143 comments… read them below or add one }

Vikas December 18, 2011 at 8:36 pm

Hi ,
I am bit confuse about Infra bond . I missed the IDFC which was having AAA Rating . Now i have option to go for L&T Infra ( AA+) rating and IFCI ( only A rating) . Which bond i should go ? L&T is private but not sure how will that work after 10 year IFCI is govt agency but having very less rating (A only). Can you guide me which bond should i go.

Thanks
vikas kakkar

Reply

dr.jagadeesha January 17, 2012 at 1:20 pm

as 80 CCF bonds are market linked,do they give any kind of assurance about the returns, because at time of maturity if market was not good we may not get back the money what we have invested. please inform regarding this

Reply

A. Saxena January 19, 2012 at 2:53 pm

IS return of infrastructure bonds are subjected to market Risk??

Reply

Shiv Kukreja January 20, 2012 at 1:34 am

Hi.. Interest Rates on Infrastructure Bonds are fixed throughout their tenures but not guaranteed in case the issuer defaults on payments of either interest or the whole of your investment itself. But as these bonds are issued by quite reputed Infrastructure Finance Companies (IFCs), there remains very low probability of any default.

Also, these investments are like Fixed Deposits. As FDs are not subject to any Stock Market Risk, these bonds are also not related to any Stock Market Risk. But in case the issuer goes into some kind of bankruptcy, then you can lose your principal also.

Reply

manjeet singh jawa January 24, 2012 at 2:19 pm

Whether benefits of tax rebate of 80C is available I invest Rs. 100000/- in Infra Bonds(80CCF).

Reply

Manshu January 24, 2012 at 8:26 pm

No, but similar benefit under a different section are available. The limit is Rs. 20,000. Please read the post and you will find all the details.

Reply

Shiv Kukreja January 24, 2012 at 9:25 pm

Hi Mr. Manjeet… Tax deduction of only Rs. 20,000/- is what you’ll get u/s 80CCF and the rest Rs. 80,000/- will be of no use for any tax deduction under any section.

Reply

sharmila January 31, 2012 at 12:49 pm

Whether the Infra Bonds (80CCF) invested in the dependents (wife’s) name can be claimed as a tax exemption from the tax payers (husband) taxable income.

Reply

Shiv Kukreja January 31, 2012 at 5:17 pm

No, only the Investor or Sole/First Applicant can claim the tax exemption.

Reply

Mahesh Kumar garg March 8, 2012 at 3:45 pm

where I can get the REC Infrastrutre Bond Forms and what banks accept these forms in Hyderabad. This is urgent Please.

Reply

Shiv Kukreja March 8, 2012 at 5:14 pm

Hi Mr. Mahesh

REC Infra Bonds issue closed on February 10th. At present, L&T, PFS, PFC & IFCI Infra Bonds are available in the market. I hope you are not confusing REC Infra Bonds with REC Tax-Free Bonds.

Reply

Manas March 9, 2012 at 1:47 pm

Is there any Infrastructure bonds currently open? I missed the deadlines. today is 9th March 2012. Please let me know. Tahnks!

Reply

Manshu March 10, 2012 at 6:41 am

I believe IFCI’s V series is open currently.

Reply

Shiv Kukreja March 10, 2012 at 9:59 am

Hi Manas

Currently there are 4 issues available in the market:

L&T (offering 8.70% & closing on March 12th)
PFS (offering 8.93% & closing on March 16th)
PFC (offering 8.43% & closing on March 23rd)
IFCI (offering 8.72% & closing on March 27th)

For more info or to invest in Infrastructure Bonds, Call/SMS 9811797407 (Gurgaon, New Delhi or Noida).

Reply

abhishek garg March 10, 2012 at 11:53 am

Hi Shiv,

Can I take the infr bond in dependendent father’s name

Regards
abhishek

Reply

Shiv Kukreja March 10, 2012 at 10:41 pm

Hi Mr. Abhishek

Sole/First Applicatnt will get the Tax deduction u/s 80CCF in case of Infra Bonds, irrespective of who pays for it. I dont think there is any check point to stop third party payments in Infra Bonds, like it is there in case of Mutual Funds.

Reply

Aakash Kathal March 10, 2012 at 2:11 pm

SIr,

I would like to know that i have applied for infrstructure Bond in month of March 2012. Therefore allotment of the same will take place in the month of April 2012. So how can i produce the Bond allotment receipt along with Form C submission.

Will undertaken bond be of no use to me, as i am unable to claim the tax rebait against the same. If, there is any other way to claim the same kindy suggest.

Best Regards,
Aakash kathal

Reply

Himanshu Kawatra March 17, 2012 at 10:03 pm

Sir,

I have applied for L&T infra bonds in dec 2011 but have not received my infra bonds till date.
Please let me know the process to track my bonds or process to receive it.

Thanks in advance
Himanshu Kawatra

Reply

Shiv Kukreja March 18, 2012 at 11:07 pm

Hi Mr. Himanshu

You can check the status of L&T Infra Bonds with your application no. through the below pasted links:

http://www.shareproservices.com/appstatus.asp

http://www.shareproservices.com/altadv/alltadv.asp

For further assistance, you need to contact Sharepro Services, the registrar for L&T Bonds.

Reply

ambika March 18, 2012 at 12:08 pm

is any infrastructure bond available in the mkt? i think i miss the opportunity!!!. plz let me know
thanks

Reply

ambika March 18, 2012 at 12:09 pm

is any infrastructure bond available in the mkt? i think i miss the opportunity!!!. plz let me know
plz let me know the best infrasturcture bond.
thanks.

Reply

Shiv Kukreja March 18, 2012 at 11:34 pm

Hi Ambika

Currently there are 4 issues available in the market:

PFS (offering 8.93% & closing on March 27th)
IFCI (offering 8.72% & closing on March 27th)
IDFC (offering 8.43% & closing on March 30th)
PFC (offering 8.43% & closing on March 23rd)

For more info or to invest in Infrastructure Bonds, Contact 9811797407 (Gurgaon, New Delhi or Noida).

Reply

Yogesh Karwa March 22, 2012 at 12:08 pm

Hi,

Will I be able to take deduction u/s 80 ccf in the following scenario?

I have applied for the IDFC Infra bonds in the month of Feb’12. Amount is debited from my saving account, I also have the acknowledgement of application. However I have not received the allotment letter as the allotment will happen in the month of Apr’12.

Can I take the deduction u/s 80 ccf in the FY 2011-12 only for applying the infra bonds without bonds being allotted to me?

Please reply ASAP.

Thanking you in anticipation.

Reply

Shiv Kukreja March 22, 2012 at 8:27 pm

Definitely Yes, you’ll get the deduction.

Reply

Rahul Pal March 23, 2012 at 10:48 am

Hi Shiv

If i have invested under the cumulative option in the infrastructure bonds,do i need to pay tax on the interest accrued every year, or at the end of the tenor of 10 years i need to pay a capital gains tax in year ten

Reply

Shiv Kukreja March 24, 2012 at 12:13 am

Hi Rahul

There is no clarity regarding this query. But I’ve my view that one should pay tax only when the interest is actually received, either annually or at the time of exercising the Buyback facility, say after 5 years or when the bonds are redeemed back to the company upon Maturity, say after 10 years.

I’m saying this because many people take these bonds in their Demat A/c. If they sell these bonds in the open market after the lock-in period of 5 years, then they are not liable to pay any tax on the interest amount. In that case, only Capital Gain Tax will be applicable. If you surrender or redeem these bonds back to the company, then it is not a sales transaction and tax is payable on the interest amount.

Reply

Neville Serro March 25, 2012 at 4:41 pm

Hi, I try my best to invest within the 1st quarter of the financial year so that last minute rush is avoided. For the current year I have invested in REC Infra Bonds in January’2012. My question is if I can buy bonds of the same value in the beginning of the first quarter i.e. for the financial year 2012-13.

Awaiting your response at the earliest.

regards,

Neville Serrao

Reply

Shiv Kukreja March 25, 2012 at 9:50 pm

Hi… Firstly, there is a 99.9% probability that these Infra Bonds are not available from the next year onwards as Budget 2012 has not extended this benefit to FY 2012-13. Secondly, these bonds are not available for investment throughout a financial year. In fact, the first issue of FY 2011-12 came in the month of September 2011 and that too failed to collect its target collections.

If you are an Indian, then you are a different kind of person because Indian investors do their tax investments only at the last minute… ;-)… Just Joking… after all even I’m an Indian.

Reply

Shrinath April 4, 2012 at 1:02 pm

I have invested Rs 20,000 in the FY 2010-11. I invested 1,00,000 in LIC and NSC. Hence I claimed Rs 1,20,000 deducted from my income while calculating tax for AY2011-12. However I just received the assement from the tax authorities and they have disallowed Rs 20,000 investment in Infrastructure bonds. Whether this can be availed for Financial year 2011-12 only ?.

Reply

Manshu April 4, 2012 at 3:55 pm

Shrinath – This was available for the last two years so you should have gotten the deduction provided everything was correct. I’m not sure why they disallowed it – which bond specifically did you buy?

Reply

indranil ghosh May 13, 2012 at 4:28 pm

can a urban co*op. bank and dist.central co-op. bank invest 80ccl bond? iin this bond any tds?
if investment what type of tax examption they gate?

Reply

Manshu May 13, 2012 at 5:55 pm

I think you mean 80CCF and not 80CCL bonds, and right now no one can issue them. The provision to issue them was temporary and it doesn’t look like this was extended to this year. We will know more at around September or so when the bonds started to get issued last year.

Reply

Shiv Kukreja May 14, 2012 at 1:52 pm

Hi Indranil & Hi Manshu

Finance Ministry has already confirmed that Infra Bonds exemption wont be extended to this FY 2012-13. Moreover, only Individuals & HUFs were eligible to invest in these 80CCF bonds.

Reply

Manshu May 14, 2012 at 5:09 pm

Thanks Shiv.

Reply

chandrahas tiwari October 13, 2012 at 6:23 pm

my brother purchased REC Infra bonds in 2011.He expired on 15.9.2012.What will happen in this case.Can it be transferred to the nominee or to wait lock in period i.e. 5 years in this case.Will you please make clarification?

Reply

Shiv Kukreja October 14, 2012 at 11:25 pm

Please check these lines. I have taken these lines from the Information Memorandum of REC Infra Bonds 2011 – “To avail the benefit under Section 80CCF of the Income Tax Act, 1961, the investment made in the Bonds needs to be held for a minimum period of at least five years from the deemed date of allotment. Hence, the Bonds are transferable only after five years. However, transmission of the Bonds to the legal heirs in case of death of the Bondholder / Beneficiary to the Bonds is allowed.”

“TRANSMISSION/SUCCESSION
In the event of demise of sole/first holder of the bonds, the company will recognise the executer or administrator of the deceased bondholders, or the holder of succession certificate or other legal representative as having title to the bonds only if such executor or administrator obtains and produces probate or letter of administration or is the holder of the succession certificate or the legal representation, as the case may be, from an appropriate court in India.”

Source: http://www.recindia.nic.in/download/REC_infra_bonds_IM.pdf

Based on this info, I think the lock-in period of 5 years will stand but you can definitely get the bonds transferred in the name of the legal heir.

Reply

S.Kavitha June 25, 2013 at 12:14 pm

Hi,
I have purchased a 80CCF bond on Jan 2012 and availed the tax benefits. But this year in 2013 I have not received any interest benefit from the bond. Please let me know why I have not received and how to follow for that.

Thanks,
Kavitha

Reply

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