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.
I want to purchase two infrastructure Bond of Rs 20000/- each, one of them is seniour citizen. please contract with me,andassists.
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…
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,
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.
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
Demat account is not compulsory for invest in Infra Bonds
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)
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.
Can I sell and recover my money after 5 years?
Yes, you can exercise buyback.
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.
Kindly confirm us that the Demat Account is compulsory at the time of encashment of your infrastructure bond.
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.
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,
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.
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.
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.
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.
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.