Does it make sense to put your money in Infrastructure bond in 2012-13?

December 23, 2012   ·   0 Comments

 

Market is floating with lining up one by one. REC was the first one to hit the market, followed by PFC and now IIFCL Tranche-1 is open right now for investors.

 

There are few changes in investing in infrastructure bonds from last year. Let us analyze these bonds and check whether it makes sense to put your money in Infrastructure bond this year.

 

1)    Additional option removed: From the 2012-13 fiscal onwards the infrastructure bonds will not provide additional tax benefits of 20,000 Rs under 80CCF. Infrastructure bonds allowed taxpayers in the highest 30% slab to save a maximum of Rs 6,180 in tax till 2012.

 

This is expected to have a negative effect on the infrastructure companies as these bonds helped them generate working capital at low interest.

 

  Read: Income Tax Saving Techniques

2)   Does infrastructure bonds investment come under 80c investment this year?

 

Yes, the investment in infrastructure bond comes under 80C investment now. An investor can save 20,000 Rs. through these bonds. Any additional amount saved can’t be exercised under 80C savings.  Infrastructure companies made a failed attempt to increase the limit to 50,000 Rs. under 80C investment.

 

3)    What is in Infrastructure Tax free Bonds for investors this year?


The interest return for infrastructure bonds is Non-Taxable unlike Tax saving Fixed deposits. Let us have a quick comparison:

 

Sr. No. Option Infrastructure Bonds Fixed deposits
1) Investment under 80C Yes Yes
2) Interest 7.5 – 8% 8-8.5%
3) Tenure 5-15 Years 5 Years
4) Interest earned Non-Taxable Taxable
5) Limit 20,000 1 Lac Rs.

 

Interest is meekly less than that of Fixed deposits as infrastructure bonds tends to extend over longer tenure from 5 to 15 years.

 Read: Comparison between PPF, NSC & Tax saving fixed deposits

Top Infrastructure Bonds

Following are the best infra bonds in India:

  • IDFC Infrastructure Bonds
  • L&T Infrastructure Bonds
  • IDBI Flexibonds
  • IIFCL Long Term Infrastructure Bonds
  • IFCI Infrastructure Bonds
  • ICICI Safety Bonds
  • REC Tax Saving Infrastructure Bonds
 

Verdict: Infrastructure bonds provides non taxable returns which makes them favorable over Tax saving fixed deposits. The capping of 20,000 Rs though leaves a lot desired on table in favor for infrastructure bonds.

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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