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.
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.
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
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.
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
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?
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.
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.
infastructre bonda are one time investment or we have to invest for five years
how to sell the matured infastructre bounds
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.
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 ?
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.
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.
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.
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.
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.
IS IDFC A GOVT OWNED CO?
No
IS IDFC A GOVT OWNED CO?
ifci infra bond with better rates available now
Thank You