IDFC has come out with the second tranche of its infrastructure bonds, and I thought I’d do a post on them because I love getting emails from people telling me that I should mail them their bond certificates at the earliest.
IDFC Infrastructure Bond’s second tranche is also covered under section 80CCF, which means the primary benefit of these bonds is the Rs. 20,000 reduction in taxable income it enables over and above the Rs. 100,000 deduction in the case of Section 80C.
IDFC Infra Bonds: Opening and Closing Dates
The new issue started from 17th Jan 2011, and will close on 4th February 2011.
Interest Rates and Options
The bonds offer an 8% interest rate, and you have an option of getting interest paid annually, or get a cumulative sum at the end of 5 or 10 years. The bonds mature in 10 years, but there is a buyback option after 5 years which means that you can sell the bonds back to IDFC after 5 years, and don’t have to wait the maturity period of 10 years.
| Details | Series 1 | Series 2 |
| Face Value | Rs. 5,000 | Rs. 5,000 |
| Interest Payment | Annual | No interest will be paid |
| Interest Rate | 8.00% | NA |
| Buyback | After 5 years and 1 day from allotment | After 5 years and 1 day from allotment |
| Buyback amount | Rs.5,000 | Rs. 7,350 |
| Maturity amount after 10 years | Rs. 5,000 | Rs. 10,800 |
Minimum Investment
The minimum investment in these bonds is Rs. 10,000, and while there is no maximum limit, you can get a lot more than 8% for shorter durations for your money in bank fixed deposits, so it makes sense to not buy more than Rs. 20,000 worth of these bonds.
IDFC Infrastructure Tranche 2 Bonds: Physical and Demat Form Available
These bonds are available in physical as well as demat form, so you if you don’t have a demat account, you can still purchase these bonds .
Credit Rating and Secured Bonds
ICRA has assigned LAAA to these second tranche bonds which indicates stable outlook and highest safety. Fitch has assigned AAA(Ind) also indicating stable outlook.
These infra bonds are secured as well.
Tax Proof for the Bonds
If you buy the bonds in physical form then you will receive a receipt, and some people have indicated that this receipt has been used by them as tax proofs. I’m not sure if everyone is able to do so, but that’s one option, and you should check with your company CA to see if this will do.
Once the bond is allotted, you will get an allotment advice indicating that you have bought the bonds, so you can use that allotment advice for tax proof. Keep in mind that you should update your mailing address attached to your Demat account and trading account, so that there are no issues later on.
Last time around, there was a very good feature with the IDFC bonds where they made a web page where people could just input their application number, and retrieve the allotment advice. They could have it this time as well, so don’t lose your application number.
How to buy the IDFC Infrastructure bonds?
You can buy them through a trading account like ICICI Direct; by filling up the physical forms, and submitting them in a branch that’s accepting them; or through an IFA (Independent Financial Adviser).
I don’t have a list of banks you can go to, but I see that KMCC, ENAM, HDFC Bank, ICICI Securities, JM Financials and IDFC Capital are the lead managers, so if there is a branch of one of these near your house or office, you can try them out.
One last word to let you know that this is not the website of IDFC or the lead managers, so writing a comment and email telling me to send the bond certificate to you or do the “needful” isn’t going to help you.
Now, as is custom – ignore what I just said and write a comment to tell me to send you the bond or do the needful at the earliest.
Also read about the REC Infrastructure Bonds.
how can we see allotment status or the recieppt as i urgently require for tds deduction prevention
thanks manshu
I haven’t seen a link or place to look up that info for IDFC tranche 2. However, what you should be able to do is to use the receipt that you got after purchasing the bond as tax proof.
Hi Manshu
Link for checking the allotment status of IDFC Infra Bonds – Tranche 1 & 2:
http://mis.karvycomputershare.com/ipo/
For more info or to invest in PFC Infrastructure Bonds / L&T Infrastructure Bonds / IDFC Infrastructure Bonds, Call/SMS 9811797407 (Delhi, Gurgaon or Noida).
Hi,
Do you think IDFC Infrastructure Fund would be beneficial? I am pretty optimistic about the future of the sector in particular, and the company as per their press release is going to invest in power, transportation, oil & gas, water management etc. I think even the fund manager has a good experience.
Anita – I think you are talking about the mutual fund, and this is the post about the infrastructure bond. Here is a post I did today about the mutual fund that will be of more value to you:
http://www.onemint.com/2011/02/22/idfc-infrastructure-mutual-fund-nfo/
It will alloted on 21st Feb, that’s what I got in email from them.
On 22nd Feb Morning, visit site(it will open next day of allotment) and enter application number. As mentioned in original blog wait for the website to launch.
http://karisma.karvy.com
Else drop mail to idfc_infra@karvy.com for your allotment status.
I APPLIED FOR 4 IDFC TRENCH-II INFRA BONDS VIDE APPLN NO-3 8595655
.BUT TILL DATE NO INFORMATION OF ALLOTMENT.PLEASE HELP.
MITHILESH
Infra Bonds are coming next week by IIFCL & L & T .
We had missed to Invest In IDFC they can save tax in coming bonds which are valid till feb. end. call on 9022235541
If Any Person Living In Mumbai need any Tax savings options along with IDFC INFRA feel free to call me on 9022235541 & 9619789186
Tax Savings Applicable 80CC Rs. 1 Lakh
Applicable 80 D Rs. 15000/- your self
Applicable 80 D Rs. 20000/- for Parents
Applicable 80CCF Rs. 20000/- Infra Bonds
Total Saving Rs. 1.55 Lakh if ur in 30% slab save Rs. 47430
If Any Person who think that they are not getting back Investment of 80 D then i have product u can save full tax save in 80 D and get ur investment back with profit also.
Hi Manshu, real nice work going on here. I passed out of college last year, and when I had to invest for the first time in my life, this site proved to be very useful. Lots of funda here 🙂
I had a doubt though. I hear from a few people if I buy back the infra bonds before maturity period, tax will be chargeable on the WHOLE amount, as in the 20k invested plus the interest that I get. Is that true ?
No Prateek, that doesn’t sound right to me at all, and I haven’t read it anywhere. Ask for the source from whoever is telling you this.
Hi If Any Person who Lives In Mumbai want to Invest In IDFC INFRA BOND Please feel free to call Mr. Dinesh on 9022235541 & 9619789186 for Door Step Service
Hi.
Can you please suggest me any forthcomming bonds in February and March. I do not want to invest in currently open IDFC bonds. Please help.
REC is out, and then L&T is supposed to come out with another tranche.
Yes New 2 Infra Bonds are coming next week which can valid upto feb end feel free to call me 9022235541 for Mumbai Investors
Just wanted to ask ..whether the interest on these bonds and the redeemed amount on expiry are taxable?
Plz share if you have some idea. Thanks for your time.
Sneha Suri.
Yes Sneha Interest is Taxable but no T.D.S. You have to show urself in I.T.
just the interest will be taxable if you take the interest option. since the 5k you invest in the beginning gets redeemed and you get that amount on redemption its your own money and there’s no tax on that.
I am really sorry Manshu. You are 100% correct. 7.5% was applicable for older issue. Thanks for all the clarifications.
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.
First time I’ve heard that….I really don’t know about that. I haven’t heard that – I posed that question to one of the IFAs answering questions here and he might be able to answer it.
Check the comments here:
http://www.onemint.com/2011/01/15/rec-infrastructure-bonds-section-80ccf-infra-bonds/comment-page-1/#comment-124281
Rahul,
I don’t know if you checked out Shiv’s response on the other post, so I’m posting his response here as well:
“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).”
Sorry for being a bit late, bit busy. Thanks for the confirmation & help. Yes I have invested in Infra Bonds with some other broker. Previous one was a idiot.
IDFC Infra bonds – last 3 days for tranche 2.
if anybody needs help to invest in PUNE kindly contact on 9762847432
Sir,
Kindly inform where can I get the IDFC application form? Is demat is compulsory or not? or physically available.
Yours
Ramamohana Rao Vanukuri
Demat is not compulsory, this link has a list of banks you can try out one of these options:
BROKERS TO THE ISSUE
Kotak Securities Ltd. Enam Securities Private Ltd.
Sharekhan Ltd. JM Financial Services Private Ltd.
IDBI Capital Market Service Ltd. RR Equity Brokers (P) Ltd.
SMC Global Securities Ltd. Bajaj Capital Ltd.
Almondz Global Securities Ltd. HDFC Securities Ltd.
NJ India Invest Private Ltd. Integrated Securities Ltd.
BANKERS TO THE ISSUE
Axis Bank Ltd. HDFC Bank Ltd.
IDBI Bank Ltd. Kotak Mahindra Bank Ltd.
ICICI Bank Ltd.
INVEST ONLINE WITH
Sharekhan Ltd. ICICI Securities Ltd.
HDFC Securities Ltd. Kotak Securities Ltd.
Reliance Money India Infoline
JM Financial Services Private Ltd.
http://www.idfc.com/infrastructure-bond/distributors.htm
Hi Manshu! You have mentioned about the 8% Coupon rate for both the options viz. With Buy-Back & Without Buy-Back. As far my knowledge goes we get 7.5% Coupon rate for availing the Buy-Back option after 5 years. Kindly confirm.
One more thing I would like to know is what happens t0 the Bonds after 10 years? Are they redeemed by the issuer or they can be traded in the Secondary market? Also if the Bonds are purchased now in Physical form…can they be traded in after 5 years Lock-in or they need to be converted to Demat form first.
Sorry for too many queries…Certain will get them sorted out.
Hey Rahul,
That was for the older issue. For the current issue the rate is 8%. You can see it on their website here: http://www.idfc.com/infrastructure-bond/scheme_features.htm
After 10 years they are redeemed.
No, they can’t be traded in physical form. You will have to dematerialize them if you want to trade them
i dnt want to purchase d IDFC BOND thru dmat. i need it physical bond. where from i get d forms & where to deposit d money ? ? kindly suggest..
Check with a bank branch close to your house, or if there is any agent nearby selling these.
Hahaha….’Please do the needful’, eh? If I can guess, the profile of such people include freshers+managers in IT firms where this line is used often. Nobody though, usually understands what that means 🙂
Anyway, back to the business of investing, did some analysis for a one year period (what with interest rates on FDs increasing and all), (I think I read about yield calculations for L&T I guess – for people not familiar with yield concept, and understand just the interest rate per year. Of course, yield takes into consideration that the interest is re-invested again etc,but on a very simple note)
Tax rate
30%
Investment in FD at 9%
Amount Invested
20000
Interest rate
9%
Interest per year
1800
After tax interest
1260
Effective interest rate per year ( Interest/Actual amount invested)
6.3
Investment in Infra bonds at 8%
Amount Invested
20000
Amount saved due to tax benefit
6000
Actual amount invested
14000
Interest rate
8%
Interest per year
1600
After tax gain
1120
Effective interest rate per year ( Interest/Actual amount invested)
8.0000
I tried estimating for different interest rates assuming interest rates on FDs would go up….until the interest rates on FDs go up to 12% (which is unheard of), FDs would not be able to beat Infra bonds investment on a per year basis…so that’s that!
I hate that word somehow! Probably picked up from someone I knew whose standard response was “spell out the needful”.
I’ve done a post on how yields on tax saving bonds are done, which build on the calculations that you show here.
http://www.onemint.com/2010/10/30/how-do-the-issuers-calculate-yield-for-tax-saving-bonds/
This might be the L&T calculation you’re referring to?
http://www.onemint.com/2010/10/19/lt-finance-bond-yield-calculation/
And another one which shows the limitations in the way the issuers were calculating yields.
http://www.onemint.com/2010/10/26/limitations-of-the-way-yields-are-calculated-for-tax-saving-bonds/
Personally I feel that the limitations are significant enough for them to drop showing the yield calculation (which they have now), and just talk about the coupon rate.
LOL – “because I love getting emails from people telling me that I should mail them their bond certificates at the earliest”.
We were looking for detailed report on IDFC Infrastructure Bonds and after viewing the above article posted by you, it was of immense help to us who are in search of such detailed and thorough discussion about the topic.
Thank you for your nice words Ishita!
Good to see you cover all the infra bonds in this detail.
Side observation: u really seem to be getting a lot of mails with ‘do the needful’ and ‘certificate request’… Hopefully you will start acting on those mails soon 😉
You have no idea buddy! And it’s so rude some of the times. I respond to every email because I feel that these guys don’t know such a basic difference, and really do need help, but it’d help if some of them toned down their language a bit. Esp the people who send their folio details and want me to send their portfolio details!!!
You do reply to all? Thats great! I mean its hard to keep replying to people to explain that they are asking the wrong person all the time. I wonder why are they rude in the mails… is it because of lack of proper communication skills?
Anyway, hope those mails don’t bog u down too much.
It’s not communication skills and it’s certainly not everyone…I think people don’t get what they are looking for, get irritated and then whoever comes in sight gets it 🙂
Hi,do you know the scrip no.on the stock exchange or how to get the latest price for this bond in market?? How should I search for this? Thanks.