IDFC 80CCF Tax Saving Infrastructure Bonds
IDFC has launched their own 80CCF infrastructure bonds, and these come with a slightly higher interest rate than the other bonds that have been released so far.
They carry a 9% annual interest rate, and IDFC has simplified the issue a little bit by having the option with only one maturity – that of ten years.
Like, the other 80CCF bonds, these will have the the annual interest payment or the cumulative option, and a buyback option after 5 years.
The issue opens on November 21, 2011 and closes on December 16, 2011. In the past they have appeared on online platforms like ICICI Direct and Edelweiss, so that’s one way to buy them, or as Austere suggested you can print the forms online and submit it in one of the collection centers.
And of course, there’s always the option of taking the help of financial advisers like Shiv to apply for them.
Here are some other details about the bonds.
| Series |
1 |
2 |
| Interest Rate |
9% |
Cumulative but effectively 9% |
| Maturity Period |
10 years |
10 years |
| Buyback Option |
5 years |
5 years |
| Buyback Amount |
5,000 |
7,695 |
| Maturity Amount |
5,000 |
11,840 |
After the lock in period of 5 years, the bond will list on the NSE and BSE.
For whatever it’s worth the issue is rated highly by ICRA and Fitch – both of them rated the issue AAA. To me, it doesn’t make a lot of sense to apply anything more than Rs. 20,000 and that too only on one of these 80CCF bonds, so if you have applied for something already then you are better off investing your money in any other bank fixed deposit which doesn’t have any lock in period and will have a slightly higher interest rate also.
A new question that I see appear a few times with respect to these bonds is if you need to buy it every year to get the tax benefit. I think the source of that question is the confusion between the tax benefit.
Please be cognizant of the fact that the interest is not tax free. The interest will be taxable every year, but the way you get the tax benefit is that the value of bonds that you buy gets reduced from your taxable salary, and that means you have to pay less tax.
The other question that I saw today was would you have to pay tax if you exercised the buyback and the answer to that is that buyback doesn’t affect how the bond is taxed.
If you took the annual interest option then the interest will be taxed every year, and if you took the cumulative option then you will be taxed capital gains. The face value of the bond will not be taxed.
I can’t quite think of anything else to cover about this issue – so if you have any comments let’s hear them and a special thanks to Shiv who informs me about these bonds quite in advance.
Hi,
Would you mind sharing the source. I could not find it on IDFC website.
Hi Rajat – the source is Shiv’s note. The bond term sheet will be updated on the website much later, and I will link to it then. I’ve seen this happen quite regularly with all of these bond issues.
Hi Rajat
Here are the links to the source:
Prospectus & Product Note
http://www.icicisecurities.com/CMT/Upload/ArticleAttachments/IDFC%20Prospectus%20Tranche%201.pdf
http://www.icicisecurities.com/ResearchPortal/AppFiles/Product_Note_IDFC_Bonds.pdf
Where in Mumbai I can get bonds form? I checked IDFC and IDFC capital site and only address i found is of contact us at BKC Kurla, I stay at Vile Parle (E)
Hi Shiv,
Wrong thread for this question, but I didn’t know where to post the question.
I had made a mutual fund investment in the year 2007 in physical form. I have lost the fund details, I have nothing on the name of the MF, Cheque. I had the debit on my HDFC bank statement but I am not able to retrieve that as well now since it has passed years and I have to visit the bank. Is it possible to retrieve my fund details using my PAN?
One of my friend was telling that her uncle told that with my other Mutual funds I could place a change of address and ask for consolidated MF statement and they would retrieve funds under my PAN and send it across.
I used KARVY, CAMS, FTAMIL’s request for consolidated statement, but it was filtered by email id and it pulled up only my recent investments.
https://www.karvymfs.com/platformservice/
Could you please help me in this regard?
Thanks,
Vidya
Hi Vidya… Yes you can ask the MF house to provide you the MF statement on the basis of your PAN no. Just contact the customer care centre of the MF house and they will send you the statement either on your mail id or your contact address.
Thank you Shiv.
I assume I have to call either of the MF House, because I absolutely have not details on my fund. I called up CAMS to enquire and the customer care representative routed me to the same link https://www.camsonline.com/default1.html (Request an ActiveStatement) where the statement is generated based on the email id. The email I had given at that time is different and it has been closed. The representative also said that he cannot pull up the statement based on my PAN no and can be only done using email id!
No worry about your investment . It’s safe till .
First find out cheque details in your bank
1. Which Fund House
2. Cheque No
Cheque clear on your account in the name of e.g. HDFC Top 200 Fund or Rel Growth Fund
then you can contact directly to Fund House
If you are not got any details
also you find out your funds details.
But first do this exercise
Thank you.
Bank statement was my last resort, I thought if we have this Consolidated statement by PAN it would have been helpful. Anyway, thank you for the response.
For Consolidated statement you want register mail ID that not possible if you have not register mail id
Contact Fund House Call Center or Office and ask them
My PAN No is XXXX ask them account status/valuation. If anypositive valuation then take a print from fund house office.
We do this process always and working properly.
Thank you Rajendra. I will try this as well.
Oh I thought you know the fund house but dont remember the scheme name. If you dont even remember the fund house then only the bank statement can help you. First make a request for your historical HDFC bank statement, check the fund house, make a call for the statement stating your PAN no. & you’ll get the statement.
Thank you Shiv.
Since these bonds will be listed on exchanges, is it likely that one can buy them off the exchanges at lesser than its face value by the financial year end (so effective yield will be higher than 9%)? How much is the likelihood of these bonds trading at discount in near future? (may be, if some NBFC / Infra finance company float bonds with higher interest rate at later date)
Also, the same rebate of 20,000 Rs. will apply if one is buying the bonds from exchanges when they become trade-able?
Thanks
They will list on the exchange after the lock in period viz. 5 years,so you won’t be able to buy the bonds before the financial year end.
Thanks to manshu and shiv for great info on the vivid bonds and that too on time. 9pc looks good still one may go for only ten k worth bond now to take advantage of even higher interest in jan feb 2012.
Hi,
In case we take cumulative option, then one will be taxed capital gains. In that case won’t the returns be better than FDs? (considering indexation benefits)
Hi Rohit
Capital Gains will apply only if one sells these bonds on the NSE or BSE on listing. If these bonds are redeemed back to IDFC, say after 5 years, then the investor will have to pay tax on the interest portion of the Buyback amount i.e. Rs. 2,695 (Rs. 7,695 – Rs. 5,000) as per the tax slab applicable. Only capital appreciation results in applicability of Capital Gain Tax and not compounding of interest.
Infra Bonds should be taken for Tax Deduction u/s 80CCF, exclusively meant for these bonds only. For higher returns there are better instruments available like FDs, NCDs etc. Beyond Rs. 20,000, these bonds are like Company FDs only, probably tradable. I think there is a high probability of these bonds trading at a discount on listing due to lack of sufficient trading volumes.
Thanks for the response Shiv.
Hi Manshu,
Which one should be good option?
1. Interest payout or
2. Cumulative
In 2nd option, tax treatment i.e. Capital gain is same as apply to sell of shares?
Thanks,
Depends on what you want to do – I’d prefer to get paid interest annually due to the high inflation and the potential opportunity to reinvest it in a higher rate.
No, it won’t attract capital gains but the interest taxation method.
I want to know its negative sides regarding redemption condition and tax hazards, How much tax to be paid against the value of Rs. 20000 after 10 years?? Does it carry any sense by listing of this bond at stock exchanges. Can I sell and recover my money after 5 years???
Hi Manshu,
Now that there are two infra bonds on offer (IDFC and L&T) and both are similar in terms of interest rates etc….which one should I go for?? Pls suggest.
Regards
Subi
It’s up to you buddy – I don’t make any personal recommendations.
Thanks Manshu….I have decided to go for IDFC….
Thanks for your follow up comment Subi.
Kindly confirm us that the Demat Account is compulsory at the time of encashment of your infrastructure bond.
Kindly confirm me that the Demat Account is compulsory at the time of encashment of your infrastructure bond and what amount i will get after 05 years.
No, Demat is not compulsory.
Can I sell and recover my money after 5 years?
Yes, you can exercise buyback.
If these bonds are redeemed back to IDFC, say after 5 years, then the investor will have to pay tax on the interest portion of the Buyback amount i.e. Rs. 2,695 (Rs. 7,695 – Rs. 5,000) as per the tax slab applicable. Only capital appreciation results in applicability of Capital Gain Tax and not compounding of interest. Is this true. kindly reply.
Yes, it is.
IF ANY ONE LIVING IN MUMBAI WANT TO INVEST IN INFRA BONDS CONTACT ME ON THESE NO’S 09619789186, 09022235541 Dinesh Mutreja (Insurance & Tax Saving Consultant since 1993)
Demat account is not compulsory for invest in Infra Bonds
THERE IS TWO INFRA BONDS NOW L&T AND IDFC BOTH COMPANIES ARE VERY GOOD BUT CREDIT RATING OF L&T IS AA+ AND IDFC IS AAA
Dineshji which one is best L&T or IDFC
Why L&T AA+ and IDFC AAA
Hi,
I’m a employeee in a private company. Till now i havnt done any tax saving investment except a LIC policy. I’m planning to invest something around 10k either in tax saving fd, tax saving mutual fund or in infra bonds. I have a demat acc with me. My preference is less complecation in getting filling the investment for tax saving and zero complecations in getting my maturity amount. Pls suggest which is better.
A tax saving FD will be good for you since you want something with the least headache.
pl explain, if you can , why return is lower in cumulative mode than annual mode of interest payment in IDFC 80 CCf long term infrastructure bond
It is not lower, it is exactly the same – why do you say it is lower?
Hi Friends, Please suggest me which one to go L&T or IDFC? Suggest me which one is good for individual interest pay out or cumulative interest? option 1 or 2 please i am lay man trying to know don’t mind asking if possible pls elaborate clearly for first time investors.
Also in IDFC sit they have mentioned 8.25 % and in L&T they have mentioned 9 % but in the above article IDFC is 9 % please clarify.
Hi
The interest rate of both IDFC & LT are both 9%, no doubt about it. Which one to select ? the decission has to be made depending on your comfort level of the promoting company. IDFC is AAA & L&T AA+..there is no huge difference. If you think you can find better investment option than 9% year on year then choose option 1 else choose option 2. since the interest amount would not exceed 1800/year might not make a huge difference to your overall asset allocation… Manshu might be a better person to answer..comments are welcome….
I agree with what you’ve said Murali.
There is not much to choose from between the two options, and you could even split your money between the two choose one as cumulative, other as annual interest. There’s not much difference between the two.
Thanks Manshu.. for your commentss…
I want to purchase two infrastructure Bond of Rs 20000/- each, one of them is seniour citizen. please contract with me,andassists.
Thank You
ifci infra bond with better rates available now
IS IDFC A GOVT OWNED CO?
IS IDFC A GOVT OWNED CO?
No
Will i have to pay tax of the tax benefit derieved/tax saved at the time of investment if i opt to sell it at the end of 5th year apart from the tax on interest portion.. As the term is 10 years but i am encashing it in 5 years.. Typically any investment under 80c/80ccf withdraws the tax benefit on investment if the term is nt fulfilled..
Thanks
Hi Ritesh.. You’ll not be required to pay any tax if you sell/redeem these bonds after 5 years. Section 80CCF gives you an exemption on the condition that your money has to be locked for 5 years, after which you can withdraw this money. Other investments like PPF, GPF, EPF, Life Insurance etc. too have a tenure of the investments but people do have the right to withdraw their money without paying tax equivalent to the tax benefit derived at the time of making the investments.
Hello,
If I opt for Annual payback option, I need to pay tax for each year when I receive the interest.
If I opt for Cumulative option, do I need to pay tax each year for accrued interest or only at the end of 5 years (in case of buyback) or 10 years (on maturity)??
W.r.t. taxation & any other factors, which option is more suitable to invest in – Annual or Cumulative?
Thanks,
-Vaibhav
It is my understanding that you pay tax when you get the cum option redeemed but I haven’t been able to confirm it with anyone conclusively. Different CAs have different opinions, perhaps because the bonds themselves have been around for only two years.
It really depends on what you are looking for – and I don’t think there is any way to say that one option is always more suitable than the other.
Hi,
Have do you rate IFCI Infrastructure Bonds Series IV as against IDFC ?
Which is better ?
Regards,
VR
I have no ratings on these 🙂
All these issues are very similar in nature, but IDFC is rated higher by credit rating agencies while IFCI has a slightly higher interest rate.
Any news on the allotment status of IDFC bonds. how much time does it normally take for the infrastructure finance company to issue to bond after the subscription is over?
Hi Mr. Ajay
As per the “Terms of the Issue” under 8 pager application form, Point No. 35 states “Allotment of the Tranche 1 Bonds shall be made within 30 days of the Issue Closing Date”. So, you can expect the allotment to get done by January 15th, 2012.
If i apply for Infra bonds with buy back faciltity in Physical mode, how will the money will be creaited to my a/c. Do i need to sell after 5 years by approaching some bank/institution etc.
Hi,
I have applied for IFCI bonds through my demat account (icici). Do i need to fill the physical form also and submit ?
You applied through ICICI Direct right? If so, then that’s fine – as long as you applied through ICICI Direct you don’t need to do anything else.
Hi Manshu,
yes i have applied through icici direct. In the physical form there is a column for demat details so got confused. So once bonds are allocated it would show in my icici direct account right ?
Can u pls explain the difference between annual & cumulative modes of interest pay out?
Which is more favourable?
Annual interest means that they will pay you the interest every year and at the end of the term they will give you the face value of the bond back. Cumulative means that you will not get any interest paid every year but the interest will be reinvested for you. At the end of the term you will get a higher amount than the face value.
If you look at the absolute sums – the money from the compounded return will be higher than the annual one but then in that case you get to see your money at the very end of the time period.
It’s up to you really, which one do you prefer.
how to sell the matured infastructre bounds
infastructre bonda are one time investment or we have to invest for five years
I have to submit the physical proofs for my investments in my company before 7th feb, 2012. If i apply for any of the infrastructure bonds which are open now, will i get the documents which i can submit as proof immediately (that is, as soon as i make the payment)? or i will get it only on the last day (example 15th feb for ifci)?
Hi Mr. Mohan… you can submit the bank stamped acknowledgement as an interim investment proof for the tax exemption; most of the employers accept it as an investment proof.. some employers also ask for a debit entry in the bank account to cross check the payment made… & then some employers ask for the original Bond Certificate, which comes within 30 days after the closure of the issue… plz check with your employer what could be submitted as an investment proof & just do that.
I would like to buy a bond now . Is it open now ?
Hi… Most of the Infra Bond issues are open at present… you name it & you’ve it, IDFC, REC, L&T, IFCI, PFS & SREI.. all these issues are open for investments.. Just choose one & go for it.
Should these bonds be viewed purely from tax saving perspective,
can I look at them from a general debt investment perspective (say instead of bank FDs)?
As we almost at the peak of interest rate cycle (I think), could there be a probability
of increase in value of paper say 5 years from now?
Is it a requirement to invest under 80C and only then can you get tax benefit under 80CCF?
I have done only investment under 80 CCF and no investment under 80C.
No, it is not mandatory to complete 80C investment to get 80CCF exemption. You’ll still get exemption u/s. 80CCF with what you’ve done.
@Shiv Kukreja: R u sure? read this link..3rd paragraph
http://infrastructurebond.in/section-80ccf-income-tax-act-1961
:-)… Hi Guest.. please read those lines carefully… It says “As the interest on Infra Bonds is taxable, investment under section 80CCF is advisable only after the investor has completely exhausted Rs. One Lakh investment under section 80C”. Here I want to stress on the word ‘advisable’. There is a sea difference between advisable and mandatory. I’m 101% sure that it is NOT mandatory to exhaust your 80C exemption first before going for 80CCF exemption.
80C & 80CCF not club each other.
If you are invested 1,50,000 in 80C you are not eligible for 20,000 (80CCF) benefit 80 CCF allow you to additional Rs. 20000 in Infrastructure Bonds, and have that reduce from your taxable income in addition to the Rs. 100,000 deduction you get from the other instruments.
If you invested 20000 in 80C & 20000 in 80CCF. You can claim both
Manshu
So What am I missing here. once I buy it in the market, I save on 80CCF for that year and then I turn around and sell it off in a year from now at a fancy profit? See the price of the instrument from last year
http://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=961695
Why is it being quoted at such a high price anyway?
Nice Vivek
But no trading volume.
It’s a trap for normal investor.
Always this done by operator . Just like Left hand sale & right hand.
Buyer & seller is same person.
IFCI is having better rate of % but lower ratings , is it safe to invest in practically?
I am not talking about the general legal statement terms like it is unsecured instruments etc.
I mean how strong is the company financially.
Thanks
IFCI is good company. My view on this company is bullish.
Basic Reason for low rating is :
It is govt. undertaking company main business is Industrial Loans, you know about it. some bad loan not recover that rating is not good. e.g. Ispat Inds
It’s a founder member of NSE & good stake in National Stock Exchage.
Hi Shiv/Manshu,
Let say i buy 20k L&T this financial Yr. And i choose pay Annual interest option. And i want to buyback after 5 yrs. So when you say intrest is taxable, will i’ve to declare income from interest every year till next 5 yr? If yes can i avoid this by choosing cummulative option to avoid unnecessary tax calculations???
Hi Gaurav.. It is definite that you’ll have to pay tax on the interest income whether you choose annual option or cumulative. In the annual option, it is confirmed that you are required to show the interest income every year under “Income from Other Sources” and you should not avoid it. But in the cumulative option, different people have different opinions whether to show the interst income annually or at the end of 5th year when one decides to exercise the Buyback Facility.
I think, under the cumulative option, one should pay tax on the interest income/capital gain after redeeming/selling these bonds after 5 years or on maturity after 10 years because one might sell these bonds on the exchanges when they start trading after 5 years.
Manshu & Shiv
Once I buy it in the market, I save on 80CCF for that year and then I turn around and sell it off in a year from now at a fancy profit? See the price of the instrument from last year
http://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=961695
Why is it being quoted at such a high price anyway?
Hi Vivek.. I’ve no clue how these bonds are getting traded in the markets and with such a huge premium. There is a lock-in period of 5 years before which one cannot sell these bonds.
please let me know if I will have to pay tax on capital amount of the sum investment in infrastructure bonds under 80 CCF at the time of redemption.
Hi Dr. Neelang… Principal amount is not taxable at the time of redemption, only the interest income is taxable.
what’s about its interest? whether it will be taxed again of tax free & If we withdraw on maturity or we apply for buy back option.
what’s about its interest? whether it will be taxed again or tax free & If we withdraw on maturity or we apply for buy back option.
Hi Mr. Nitin… Interest is taxable whether it is annually paid to you or it is under the cumulative option & paid to you when you exercise the Buyback facility or on maturity. It is taxable under all the options.
Sir,
I had invested Rs.20,000/- in IDFC infrastructure bond on 22nd February 2012 and my application No. is 41644143. So far I have not received any information on allotment of bond. Please confirm the status of this.
Thanking you,
yours faithfully,
Sir,
I had invested Rs.20,000/- in IDFC infrastructure bond on 22nd February 2012 and my application No. is 41644143. So far I have not received any information on allotment of bond. Please confirm the status of this.
Thanking you,
yours faithfully
Prakash Kumar
Hi Mr. Prakash Kumar.. this is not IDFC’s or Karvy’s website so nobody here would be able to confirm the status of Bonds’ allotment to you. IDFC Infra Bonds – Tranche II issue is scheduled to close on March 5th and the co. delivers the Bond Certificates within 30 days after the closure of the issue. So you can expect the certificates to reach your address before April 5th. For any further info on your investment you need to contact either Karvy or IDFC.
I HAD INVESTED LAST YEAR IN IDFC BOND BUT I HAVE NOT RECD.ANY CERTIFICATE IN EXCHANGE .INSTEAD OF SENDING BANK DETAILS SHOWING CHEQUE ISSUED NO.&DATE THERE IS NO RESPONSE.LET ME KNOW WHAT SHOULD BE DONE NEXT
i am in saudi arabia i send money to my himilayan bank account pls can u tel me how i can cheaquek my balance by online.
Dear Sir,
In Feb.2012 I have invested Rs.20000/- for IDFC infrastructure bond from IDBI Bank-Indira Nagar branch at LUCKNOW(U.P.). But till now I have not received the bond. And this amount is deducted from my account.
can you help me please.
IDFC BOND application no.-21909890
Thanks
Hi Akhilesh,
Please check these two links to know about your application’s status:
http://mis.karvycomputershare.com/ipo/
http://karisma.karvy.com/investor/jsp/idfcresult5.jsp?type=APP&appno=21909890
Just fill in your address again while checking the status on the first link.
Hi Akhilesh,
Your IDFC Infra Bond allotment done.
You can contact your broker for your certificate . If your agent/broker know how to get certificate then you can received your certificate Within 15 days.
Your certificate not deliver to you
If any qurey after contact your agent then ask me how to do.
Can you please publish the various interest payment dates for various 80CCF bonds the way you have published for the Tax savings bonds? That way it would be helpful for all of us who have purchased these bonds.
I wish to invest in infrastructure bonds which qualify for rebate u/s 80 CCF. Please advise.
Hi Mr. Rawat,
Tax exemption u/s 80CCF is no longer available, it got withdrawn FY 2012-13 onwards.
I have REC bond which was opted with annual interest payment. I think it is taxable income. May I know the percentage of tax or it is same as bank FD interest ?
lock period completed and the tax free bonds transferred to zero fund , in this case i want to know the exact position, and if i will take refund of these bonds than explain the tax liability.
I have opted for buyback option for IDFC bond 2011 after 5 years. Pl confirm whether buyback amount -interest portion is taxable or not. If taxable, pl indicated tax rate.
Hello would you mind letting me know which hosting company you’re using? I’ve loaded your blog in 3 different internet browsers and I must say this blog loads a lot quicker then most. Can you recommend a good hosting provider at a reasonable price? Thanks, I appreciate it!
Dear Sir,
I have bought 4 bonds of IDFC in feb 2011.It is in physical form. I want to redeem these now.Pl inform how it can be done & whom i have to submit the papers.
I purchased these bonds with buyback option effective 30/12/16. I received buyback amount for all 4 bonds but it has been withdrawn for 3 bonds. my denatured account shows no balance. whom to approach.
Hi Mr. Kalra,
You need to contact Karvy Computershare for the same on 1800 3454 001.
Hello,
How should one look at the taxability of the buy back option for IDFC infrastructure bonds Tranche1 issued in Dec. 2011?
I had invested Rs. 20,000/- and opted for cumulative buy back option. It got exercised after 5 years lock in in Dec. 2016 and I received a sum of Rs. 30,780/-
Que: Should I include Rs. 10,780 (interest income?) as income from other sources to be taxed as per my tax slab? OR it has to be considered as long term capital gains and taxed as per debt LTCG (20% with indexation)?
Hi Vaibhav,
This amount of Rs. 10,780 is taxable as Income from Other Sources and not as Capital Gain, as you have surrendered these bonds back to the company and not sold them on the stock exchanges.
Thanks Shiv.
Hi, I had purchased IDFC bonds in Nov -2011 for INR 20k.. I received the redeemed amount of INR 35k in Mar’2017 . I had opted for annual interest. Is LT CG applicable for the excess amount received (35k-20k) @ 10%?