Also read about the REC Infrastructure bonds here or the IDFC Infrastructure Bonds Tranche 2 here.
Update: There has been a change in terms, and you can now invest in these bonds in physical form also. Here is the link to relevant IFCI page.
The issue has been extended till January 12 2011
The IFCI Infrastructure bonds are the latest infrastructure bonds to be issued with the 80CCF benefits, and are the second tranche from IFCI, which issued them earlier this year as well.
The IFCI bonds are issued with section 80CCF benefits which means that they will get you a tax benefit of reducing your taxable income over and above the Rs. 100,000 under Section 80C with a cap of Rs.20,000.
The issue has been rated â€œBWR AAâ€ by â€œBRICKWORK RATINGS INDIA PVT LIMITEDâ€ which means that they are rated as instruments with high credit quality.
Here are some other details about them.
IFCI Infra Bond Options
There are 4 series that you can choose from with a combination of getting interest paid annually, cumulatively, and having a buyback or not.
Here are the details of the 4 series.
Non – Cumulative
Non Buyback &
Non â€“ Cumulative
Non â€“ Buyback &
|Face Value||Rs. 5,000||Rs. 5,000||Rs. 5,000||Rs. 5,000|
|Buy Back Option||Yes||Yes||No||No|
|Coupon||8.00% per annum||8.00% compounded annually||8.25%||8.25% to be compounded annually|
|Redemption Amount||Rs. 5.000||Rs. 10,795||Rs. 5,000||Rs. 11,047|
|Buyback allowed after||5 years||5 years||NA||NA|
As you probably noticed IFCI didnâ€™t show yields in the same manner as L&T and IDFC, where they took the tax benefits based on various slabs and showed yields at different tax slabs and interest payments. This is probably a good idea given the various limitations of the way those yields were calculated.
How does the IFCI infrastructure bond buyback option work?
At the time of selecting a series you have to select either series 1 or series 2, which allow the buyback after 5 years lock in period. To exercise the buyback you have to write to IFCI to request it, and this has to be done in the month of November for the year when you want to exercise the buyback.
Open and Close Date of the IFCI Infra Bond
Opening date of the issue: November 16th, 2010 and Closing date of the Issue: December 31st ,2010. They can close earlier as well if their entire demand is met.
Is a Demat account necessary to apply for the IFCI Infra Bond?
Yes, right now it is necessary to have a demat account to apply for these bonds as they wonâ€™t be issued in physical format. Even the IDFC bonds started out as Demat only, and were later on changed to allow physical forms also. The target sum to be raised by IFCI bonds are much lesser than the IDFC ones, so they might not feel the need to change and include the physical format as well.
Will tax be deducted at source from the interest payment?
These IFCI 80CCF bonds will not attract TDS, however the interest itself is taxable at your hands. So, the bonds donâ€™t attract TDS, but it doesnâ€™t mean they are tax free.
Will the bonds list in a stock exchange?
Yes, IFCI plans to list these bonds on the Bombay Stock Exchange (BSE), but from reading the information memorandum it seems to me that you can only sell these bonds after the lock in period of 5 years.
Can NRIs invest in the IFCI Infrastructure bonds?
NRI customers are not eligible to apply for the issue.
What if you have already bought another infrastructure bond?
If you have already bought another infrastructure bond, and exhausted the limit of Rs. 20,000 then you wonâ€™t get any further tax benefit by buying this bond. There are also several banks that offer 8% interest for terms less than 5 years, so you wonâ€™t get much value out of locking your money in this instrument for 5 years.
How can you buy the IFCI infrastructure bonds?
You can buy these bonds through your broker like ICICI Direct, or can submit an application form in one of the bank branches that are accepting them. The information memorandum lists down a large number of HDFC bank branches so you can go to one near your house, and they might be selling the bonds or can at least tell you where you will get them.
Should you wait for another issue?
This issue is 50 basis points, or half a percentage higher than similar L&T bonds issued earlier, and reader Amit Khandelia actually left a comment about LIC coming up with a future issue, and possibly even offering term insurance free with their offer.
IDFC has also indicated interest in coming up with a future issue, so they might come up with another issue too.
The advantage with waiting is that you may get a slightly higher interest rate, maybe half a percentage or one percentage more, but as I said earlier if youâ€™re able to wait and get a bond which offers a percentage higher, and you invest the maximum Rs. 20,000 in it â€“ that means an additional 200 bucks extra in a year; what is that worth to you? How many hours of Googling and speculating is it really worth?
The advantage of getting it now is that you can get this one thing done with, and have plenty of time to receive the certificates for tax proofs or whatever else you need.
This is a personal decision really, but something worth keeping in mind the next time you speculate on whether you should wait or go ahead with it.
Please leave a comment if you have any questions or observations.
234 thoughts on “IFCI Infrastructure Bonds: Tax Saving Bonds under Section 80 CCF”
Sir, I had purchased inf. Bond Series -v of Rs 20,000.00 on 26/06/2012.Now I want to close this. So, what is the procedure.
i sent my original bond along with cancelled cheque on 1 st of nov for redemption/buyback to beetal ..how much time will it take for processing and getting the money into my account .
I have purchased 10 IFCI SR I, option II bonds. I tried to sell them online from my demat account. Currently there doesn’t seem to be any trading activity in the bonds. However,I want to know what is the procedure for the company to buy them back at the current market rate which is 18300 per bond.
I am having 4 IFCI bond series 2011 in (de mat form ) serial no INE039AMU6 my lock period 5years I.e after 31.01.2016. How can I sell .Please reply me on my mail ID email@example.com
I, Laxman Kumar Ruhela have been received payment of Rs 31,736/- against 04 infrastructure bonds each Rs.5000/- after 05 year i.e Total Rs.20,000/-.
Kindly clarify that interest amount Rs.11736/- is taxable or not,
Rs.31,736/- -Rs.20,000/- = Rs.11736 Interest
My mail ID : firstname.lastname@example.org
Laxman Kumar Ruhela
Hi Mr. Ruhela,
Interest amount of Rs. 11,736 is taxable as Income from Other Sources.
I invest in the tax saving bond long back for Rs 40000.00 (20000.00 two times) but these amount not refund to me.Pl. guide me how to get these amount. REGARD.
I applied the tax saving bond two times Rs 5000-4 nos. each time long back but my amount of Rs 40000.00 not return so far.How to get these amount Pl. guide me. REGARDS.
I purchased 4 IFCI Bonds series 2011 in demat form.I had opted for buy back facility.Will you please advise how and when I can apply for buy back .My email IDis email@example.com My mob no. is 9818268328. Will it be automatically credited to my bank account.Please advise.