REC Infrastructure Bonds: Section 80CCF Infra Bonds

by Manshu on January 15, 2011

in Fixed Deposits

Shiv – an independent financial adviser– left a comment yesterday informing me that REC infrastructure bonds are already available for purchase, and I thought I should do a post on this because a lot of people are looking for this information right now.

These bonds are issued with Section 80CCF benefits which means that they will get you reduction in your taxable salary of Rs. 20,000 over and above the Section 80C limit.

I have done a detailed post on Section 80CCF FAQs earlier, so if you’re new to this site or these bonds, it might be a good idea to check that out.

That being said, let’s take a look at some of the features specific to the REC infra bonds.

Open and Close Date

The REC 80CCF bond issue opened on January 12, 2011, and will close on March 28 2011.

Interest Rate

REC will offer two options – one with buyback facility, and the other one without a buyback facility, and the interest rates will differ on those options.

Here is how it will work out.

Options With buyback after 5 years Without buyback: Redeemable in 10 years
Interest Rate 8.00% 8.10%
Interest Payment Yearly Yearly
Payment Date 31st March every year 31st March every year
Buyback after 5/6/7/8/9 years Not Applicable

Minimum and Maximum Investment

The bonds have a face value of Rs. 5,000 and the minimum you have to buy is two bonds, so the minimum investment you can do is Rs. 10,000.

There is no limit for the maximum, but since the main benefit of investing in infrastructure bonds is getting the tax break, and the cap on that is Rs. 20,000 – in a way that becomes the upper limit.

You can get more than 8% on your money in shorter time frames in bank fixed deposits these days.

Physical form or only Demat?

REC has an option of physical form along with the Demat option, so even if you don’t have a Demat account you can invest in these forms in the physical form.

Tax Proof for the REC Infrastructure bonds

When you buy the bond it will not be credited to your account immediately, and if you are buying it online you won’t get any documentation that shows you purchased the bond.

This has caused some troubles to people who had to submit tax proof at their work place. I’m not a tax expert but some people here have suggested that when they apply physically (and give their demat account number) – they get a receipt, which has been used for tax proof in their office. So, if possible, check with the people who do your taxes if that receipt will suffice, so that you don’t get into any trouble later on.

Credit Rating of REC

These bonds like other infra bonds before them are unsecured, but REC itself has been graded very well by the rating agencies, and is a Navratna as well.

AAA / Stable CRISIL
CARE AAA CARE
LAAA ICRA
AAA (IND) Fitch

How can you buy REC Infrastructure Bonds?

If you are interested in buying the REC infrastructure bonds, then you will have to fill up the physical form, and submit it to one of the collecting branches.

You will need documents like PAN, address proof, and Demat account proof to submit along with the application form.

This link has got the list of bank branches where you can submit the application form.

You can download the application form here.

Alternately, you can look for an independent financial adviser in your area who can assist you with it, or see if your online trading account allows you to invest in these through their platform or not.

Also read about the IDFC Infrastructure Bond Tranche 2.

{ 69 comments… read them below or add one }

khalid January 16, 2011 at 2:25 am

Thanks a million for sharing the information, This will also help guys who are looking for various infra bonds for saving taxes.

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Manshu January 16, 2011 at 6:02 am

Thanks Khalid – I was totally unaware of this till Shiv wrote a comment. Surprised how the big newspapers never reported on it, or maybe they did report it and I missed it.

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Amit Kumar Keshri January 16, 2011 at 10:37 pm

want to invest in Infrastructure bonds u/s 80ccf please revert

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Manshu January 18, 2011 at 2:23 am

Please use a trading account like ICICI Direct; go to a bank branch to buy the form and submit it or, approach an IFA. OneMint is neither of these and can’t revert to you for buying these bonds Amit.

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Satyam Mehrotra January 17, 2011 at 4:12 am

i made an application no.43201702 for puchase of Rs, 20000/-.pl.mailme on this my e mail allotment details .

thanks

satyam

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Manshu January 18, 2011 at 2:29 am

Satyam, this is not REC or its lead manager’s website, so I can’t send you the allotment details. Contact the people that sold this bond to you to get this.

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rahul February 24, 2011 at 8:06 am

i am working in elite stock management limited and we provide services in order to fulfill all financial needs of our clients. if any body needed any kind of bonds just contact me on my mobile number- 9013798928

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akersh jain January 17, 2011 at 11:03 am

plz.. provide me all infrastructure bond form, Interest Rate & Minimum and Maximum Investment

thank u sir
jainbroker@yahoo.in

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Manshu January 18, 2011 at 2:34 am

It looks like you need this to sell your clients? You will have to research this more yourself and get a few contact details.

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Shiv January 18, 2011 at 11:11 am

Hey Manshu.. i’m back again.. looks like investor really want to invest in IDFC/REC Infra Bonds & are considering you as a nearby “Financial Kirana Shop” where they can call (read it Message) anytime & the shopowner ( for them You) should always remain ready with their supply boys to get the products delivered 24×7… Investors plz take note that you need to contact Investment Services Providers like me & others to help you get your invetments done in these type of bonds… and for all your allotment related queries/complaints you should contact the respective Registrars of these issues like Karvy Computershare for IDFC & Beetel Financial & Computer Services for REC as even we cant help you in that… 🙂

To invest in REC/IDFC Infra Bonds or for any other info you can Call/SMS us at 9811797407 (For Delhi, Gurgaon & Noida only plz).

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Manshu January 18, 2011 at 11:14 am

LOL – well said, and welcome back 🙂 Looks like LIC will not be coming out with their bonds? Reader sent me an email with a Moneycontrol link.

Was going to post on that now.

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Shiv February 5, 2011 at 6:50 am

Hi Manshu… FYI & your readers also, who are keenly awaiting LIC to come up with Infrastructure Bonds:

Latest on LIC Infra Bonds (dated February 4, 2011)…

http://www.business-standard.com/india/news/lic-infra-bond-issue-unlikely-this-fiscal-chairman/124706/on

“As a regulator, we have certain concerns with regard to insurance companies issuing infrastructure bonds… I think there should be certain curbs on such issues by insurance companies. We are yet to look into this issue,” Irda Chairman J Hari Narayan had said.

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Manshu February 6, 2011 at 7:25 pm

Thanks Shiv.

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Shiv January 19, 2011 at 3:25 am

Yaar you never know with Regulatory /Governmental issues… at one time they deny approvals & then they give it with some modifications… in the case of LIC Infra Bonds I guess there is no problem except of the fact that its basically a Life Insurance company & that is their core area & not Infrastructure Financing… Probably they wanted to include the Insurance feature also in their Infra Bonds but could not get IRDA or RBI nod.. So probably if they drop the idea of incorporating Insurance thing also in their Infra Bonds they might get the approval..

But I dont understand one thing why people are so eagerly awaiting LIC Infra Bonds when there is REC Infra Bonds available in the market… Boss there’s no such thing as a free lunch (especially in the Financial World where these cos. need to maintain NIMs to survive).. Even if LIC incorporates some insurance component in its bonds, its going to charge somewhere… These Bonds cant carry coupon rate higher than last month’s 10 year G-Sec. yield… so its not that LIC would offer 10%-12% int. rate on its Infra Bonds.. The range would lie somewhere between 7.75% to 8.25% only… So investors if you need to invest/save tax & have investable money with you, go ahead & invest & plz stop speculating as more than 99% people (disclaimer including me) have no idea whats actually happening.. 🙂

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ramakanta January 24, 2011 at 8:51 pm

Sir, Now REC and IDFC infrastructure bonds are in the market. Which will be better to invest now.

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Manshu January 24, 2011 at 11:21 pm

There’s very little diff, but IDFC is secured, and has had this feature of providing the tax proof online which helped a lot of people earlier, so those are some things in their favor. But there isn’t much to choose from really.

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Shiv January 24, 2011 at 10:01 pm

Hi Ramakanta.. There is not much difference between the two.. you can go with any of the two.. One limitation in REC Infra Bonds is that its not offering cumulative interest option & you’ll have to opt for Annual Interest option only.. If you want to remain invested for 10 years then you can go for REC 10-year 8.1% option… I think the difference between REC & IDFC is quite similar to the diffrence between SBI & HDFC Bank.. One is a bit passively managed and other is quite professionally managed.. All these institutions are financially sound, their NIMs are healthy and RBI is quite vigilant about their activities..

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Manshu February 2, 2011 at 7:29 pm

Shiv – question to you from another comment in this post:

One more query I have. Yesterday I had a conversation with a Broker regarding Cumulative Option. He said that only those who have Demat A/c can opt for the Cumulative option. Investors buying the Bonds in Physical form has to opt for Annual Interest payment option. Kindly confirm.

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Shiv February 3, 2011 at 9:27 am

What Rubbish ??.. there is nothing like that… REC is not offering the cumulative interest option & the interest will be paid on March 31st every year whether its 8% interest option or 8.1% interest option.. IDFC is offering Annual or Cumulative interest option under both “Demat Form” option as well as “Physical Form” option… Probably the broker wanted the investor to get the Demat A/C. opened with him.. 🙂

For more info or to invest in REC Infra Bonds / IIFCL Infra Bonds / IDFC Infra Bonds, Call/SMS 9811797407 (Delhi, Gurgaon or Noida).

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Manshu February 3, 2011 at 10:30 am

Thanks very much Shiv – this is certainly very helpful, and I hope your response helps some other people from getting scammed.

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Shiv February 3, 2011 at 12:03 pm

My pleasure Manshu.. :-).. By the way IIFCL Infra Bonds are open for subscription and L&T Infra Bonds are to hit the markets on February 7th.. Both these issues are a bit more complicated so fasten your seat belts & get ready to take off.. 🙂

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Manshu February 4, 2011 at 11:26 pm

Yes, I’ve been meaning to write on that but too busy these days.

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sumanta saha January 27, 2011 at 8:50 pm

Is the interest compound for non buyback option in rec bonds?

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Manshu January 28, 2011 at 5:34 am

No, Sumanta – It’ll be paid annually.

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sivasagar January 29, 2011 at 10:06 am

sir,
can u plz explain me is it necessary to issue rfp for bonds issue. where do u we get formats of rfp for bonds issue. wht is the role of rfp in bonds issue.

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Manshu January 29, 2011 at 10:21 am

RFP? What are you talking about? Can you please explain?

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h s m kamath January 29, 2011 at 11:41 pm

i have invested Rs.20000/ in l&t infra.str. bond through demat so far for availing deduction u/s 80 ccf.I have not received any documents so far. how can i claim deducyion in my IT return?

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sreenidhi January 30, 2011 at 12:38 am

Hi Manshu n Shiv
I was searching online for the best investment plans for 2011 when i bumped in here.. My mother has invested in the 8% non cumulative RBI bonds, 2003. It gets matured on this march. Now I want to help her find the best investment strategy.. Some of my friends suggested that as the FD rates are much higher, she can think of starting FD with State bank which provides the highest annual interest which 9% and there is no lock in period like bonds. Infrastructure bonds are not as safe as RBI bonds.. What about post office schemes? RBI bonds provided her with half yearly interest which attracts her. She says she does not know anything and she is happy with RBI bonds. But i think there are other better schemes.. Can u pls advice?

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Shiv January 30, 2011 at 6:57 am

Hi Sreenidhi.. Had you mentioned the amount of investment and your mother’s tax bracket that would have helped but anyways I assume the amount to be below 5 lacs and the tax bracket to be below 20%. As announced earlier this month, SBI would be coming out with a retail bond issue in February 2011, I expect them to give attractive interest rates on those bonds as they did in their last bond offering in October 2010. But you mentioned that RBI bonds would be maturing in March 2011 so she would not be having the money to invest in SBI bonds. Observing that your mother is quite conservative, which is natural, had I been in your place, I would have gone for IndudInd Bank’s 999 days’ FD which is giving 9.5%. There are one or two other banks also which are giving better rates than this but I find IndusInd Bank to be a professionally well run bank. I expect Bank FD rates to peak in March this year. So if the rates do go up & some other good banks come up with better rates, then you could go for one of those FDs otherwise go for IndusInd Bank’s 999 days FD. I’ve not suggested here some other better options because of minor risks involved in them. Happy Investing.. 🙂

For more info on REC/IDFC Infrastructure Bonds or to invest, you can Call/SMS us at 9811797407 (Delhi, Gurgaon & Noida).

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Shiv January 30, 2011 at 7:08 am

Hi Manshu.. I think Mr. Sivasagar meant Draft Red Herring Prospectus (DRHP) while he mentioned “rfp” above… please clarify Mr. Sivasagar..

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venkat January 31, 2011 at 2:22 am

if any body required Infra Bonds processing, please call me at 9241545354 (for bangalore only).

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sivasagar February 2, 2011 at 1:54 am

rfp means request for proposal? for inviting tenders from underwriters in case of bonds issue. explaining the company credentials. where do we get those formats?

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sivasagar February 2, 2011 at 2:13 am

i am working with a premier psu kindly guide me the steps involved in raising funds through private placement bonds.

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Manshu February 2, 2011 at 6:59 pm

I really have no clue on how this will be done.

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Girish February 3, 2011 at 4:58 am

May be you can try SEBI’s website

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Supriya February 9, 2011 at 10:58 pm

Hi,

Can someone tel me which option is more beneficial- 5 years with buy back facility or 10 yrs without buyback facility (for REC bonds)?

Also, whether REC infra bonds are a better option or L&T infra bonds?

Please forward me the link from where i can apply for REC infra bonds.

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Shiv February 10, 2011 at 4:44 am

Hi Supriya.. I think the 5 year option is better as firstly the net effective yield under the 5 year option is higher than the 10 year option.. secondly there is very minor difference between the interest rate offered under the 5 year option (8%) and the interest rate offered under the 10 year option (8.1%).. moreover why do you want to give up the freedom of encashing your investment if you’ve want your money back after 5 years.. the biggest benefit of these Infra Bonds is the additional tax benefit they are offering.. I think after 5 years there would be better investment options available to you than these Infra Bonds fetching 8% or 8.1% interest…

I think L&T Infra Bonds or IIFCL Infra Bonds are better investment as compared to REC Infra Bonds as both are offering higher interest rate (8.2% & 8.15% respectively with 5 years lock-in) than REC bonds which is offering 8% interest rate.

I’ve no idea which link is offering investment option for REC Infra Bonds but you can invest in these bonds through Financial Services Providers like us or some Designated Banks in your city or through online Trading & Demat A/Cs..

To invest in L&T Infrastructure Bonds / IIFCL Infrastructure Bonds / REC Infrastructure Bonds, you can Call/SMS us at 9811797407 (Delhi, Gurgaon & Noida).

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NATHAN February 14, 2011 at 2:26 am

Sir,
Please send details of infra structure bonds in india
nathan

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Manshu February 14, 2011 at 5:00 pm

Nathan – look at this post to see what options are currently available:

http://www.onemint.com/2010/11/20/infrastructure-bonds-calendar/

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Bala February 17, 2011 at 11:27 pm

What about IIFCL bonds – they are open too, but nobody seems to be talking about them..

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Manshu February 18, 2011 at 9:19 am

I got too busy with other things and never got around to writing about them, but I will do a post on them shortly. I don’t know about others….I mean you’re saying that it doesn’t get as much media coverage or what exactly?

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Supriya February 18, 2011 at 2:20 am

Hi Shiv,

Thanks for the information.

Manshu,

Cant we apply online for L&T infra bonds? Do you have any information wrt same?

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Manshu February 18, 2011 at 9:15 am

Yes you can – I never got around to doing a post on the second tranche of L&T and IIFCL. Will try and get them done soon.

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amitkumarr February 22, 2011 at 12:58 am

please help me to understand the Indian income tax structure.

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Manshu February 22, 2011 at 7:05 pm

That’s really a very vast subject, and one that’s not really going to be covered on a blog like OneMint.

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rishiraj February 22, 2011 at 11:28 am

L &T INFRASTRUCTURE BONDS – SECTION 80 CCF

TAX EXEMPTION…

PEOPLE FROM PUNE CAN CONTACT ON 9762847432 ( RISHIRAJ)

HURRY!!! ISSUE CLOSES 7TH MARCH 2011.

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rishiraj February 28, 2011 at 6:18 am

invest in IDFC infrastructure bonds.
interest rate of 8.25%
tax deduction u/s 80 CCF

For details & subscription in PUNE contact me on 9762847432 (Rishiraj)

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Bairam Sunil Kumar March 2, 2011 at 6:08 am

Hello Guys,
Great Job Shiv and Manshu,
I have a query regarding the same issue talking above post, Do I need to have DMAT accout for sure, as I have returned from UAE recently and joined in job in INDIA , I am planning to have Infrastructure bonds for my next financial year, Which month will be the good time , and as per the posts above L&T and IIFCL seems to be better option for investing.
Suggest me for more info on the same.

Regards
Bairam

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Shiv March 2, 2011 at 9:11 am

Hi Mr. Bairam Sunil Kumar.. Demat is not mandatory for Tax Saving Infra Bonds Investment but preferable & advisable if you trade in shares also.. The best time to do these investments is when you think the interest rates are around their peak levels like in the current scenario, you’ve spare money with you & find no better alternate investments and when you are sure that you require to invest in these bonds to save your taxes.. 🙂

Finally I think L&T Infra Bonds and PFC Infra Bonds are offering the best interest rates at present (both @8.3% with 5-years lock-in)..

To invest in L&T Infrastructure Bonds /PFC Infrastructure Bonds / IDFC Infrastructure Bonds or for any other info, Call/SMS 9811797407 (Delhi, Gurgaon & Noida)

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dilip goswami March 8, 2011 at 2:25 am

sir,
Ihaveinvested Rs 20,000.00 in L&T infracture bond. After deduction of standard deduction of Rs1.60Lacs and investment(excluding L&T Bond) of Rs1.00 Lacs .I am in the tax slab of Rs1.60lacs toRs 5.00lacs. How much taxexemption I shall get on this infra bond of Rs 20,000?Please inform through my Email add.

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Manshu March 8, 2011 at 3:00 pm

In that slab the tax rate is 10%, so you will get exemption of slightly over Rs. 2,000 because of this infra investment.

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SATISH GOYAL March 9, 2011 at 7:25 am

INCOME TAX REBATE U/S 80 G i.e. DONATION TO APPROVED INSTITUTIONS IS GRANTED ON WHICH AMOUNT ? MEANS BEFORE 80C OR AFTER 80 C ?

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Manshu March 10, 2011 at 5:34 pm

That’s independent of 80C.

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venkat March 18, 2011 at 3:43 pm

if any body required Infrastructure Bonds processing, please call me at 9241545354 (for bangalore only).

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Yatendra March 22, 2011 at 5:17 am

Thanks a ton……………

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manila rattan March 25, 2011 at 3:26 am

which option is better to invest in buy back or w/o buy back. how can non buy back bonds be redeemed and after how much time ??

thanks ..

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Manshu March 27, 2011 at 9:14 am

I personally prefer the buyback option because the main benefit of these bonds is the tax benefit, so given that – I’d want the redemption to happen as quickly as possible and not mind getting a little less in interest every year.

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anil April 19, 2011 at 5:53 am

Hi,

I have applied for rec-infra bond under section 80ccf on 26.03.11.(appl.no-324251). What is the fate of my application.

-anil

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Shiv Kukreja April 19, 2011 at 9:05 pm

Hi Mr. Anil

You can check your application’s status on this link by putting your PAN No.:

http://www.beetalfinancial.com/bond.aspx

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g.srinivas July 14, 2011 at 8:05 am

HI THIS IS SRINIVAS PLEASE TELL US A LONG TERM BONDS IF THERE IS A NEW ISSUE FOR INVESTMENT ABOVE ONE CRORE

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Manshu July 15, 2011 at 1:09 am

No, there is no new issue as of now.

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Rakesh Babu July 20, 2011 at 3:52 pm

i reqiured 20000/ infrasturture bond plz sujest.where invest.

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Manshu July 21, 2011 at 5:07 am

They aren’t open right now, please wait till Nov or so which is when I expect them to open up, and then you can invest in them.

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pradeep chandra saha August 22, 2011 at 9:18 pm

I HAVE FORWARDED AN APPLICATION FOR REC INFRA BOND ISSUANCE
> ALONG WITH A DD FOR RS 20000/- ON 15.03.2011 BY COURIER TO FANCY BAZAR
> BRANCH of Canara Bank, IT BEING AN AUTHORISED COLLECTION CENTRE FOR
> THE SAME.BUT TILL DATE I HAVE NEITHER RECEIVED A BOND CERTIFICATE, NOR
> ANY ACKNOWLEDGEMENT FROM YOU TO THE FACT THAT THE APPLICATION
> ALONGWITH DD HAS BEEN RECEIVED/PROCESSED.
>
> THIS IS TO REQUEST YOU TO INTIMATE ME THE STATUS .an early
> reply will be highly appreciated.
>
> THANKING YOU.
>
>
>
>
>
> PRADEEP CH SAHASBI, PASSIGHAT BRANCHDT. EAST SEANGARUNACHAL PRADESH.
>
> EMAIL-p-saha@sbi.co.incell no-09402132148/ 0940228071903783-210393
>
>
>
>

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SANJEEV November 12, 2011 at 10:46 am

I Need AGENT FOR BUYING REC INFRA BOND

SANJEEV
9850336098

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Shiv Kukreja November 14, 2011 at 10:07 am

Hi Sanjeev.. REC Infra Bonds for the current FY are yet to hit the streets, so no agent would be able to help you in your investment.

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pran pandita December 20, 2011 at 7:31 pm

L&T is giving 9% intrest and IFCI is giving 9.09% intrest Then why REC is giving only 8% intrest

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amit December 22, 2011 at 1:15 pm

L&T is giving 9% intrest and IFCI is giving 9.09% intrest Then why REC is giving only 8% intrest ?

Ple…..Reply Soon.. 🙂

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Manshu December 23, 2011 at 4:54 am

REC has new bonds with 8.95% interest now Amit – please use that!

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