Long term infrastructure bonds
What are infrastructure bonds?
In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (“Income Tax Act”) to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly.
Long term infrastructure Bonds by IDFC
IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-term infrastructure bonds by IDFC in the nature of secured, redeemable, non-convertible debentures of the Company of face value of Rs. 5,000 each, having benefits under section 80 CCF of the Income Tax Act for an aggregate amount not exceeding Rs. 29,289.64 million (“Tranche 2 Bonds”) issued pursuant to the Prospectus - Tranche 2 dated January 4, 2011 (“Prospectus – Tranche 2”) (the “Issue”). These bonds have got rating of LAAA by rating agency ICRA and AAA (ind) by FITCH indicating a stable outlook.
Series |
1 |
2 |
|
Face Value |
Rs 5000 per Bond |
||
Minimum number of Bonds per application* |
Two Bonds and in multiples of one
Bond thereafter. |
||
Interest payment |
Annual |
Cumulative |
|
Interest Rate |
8.00% p.a. |
N.A. |
|
Maturity Amount per Bond |
Rs. 5,000 |
Rs. 10,800 |
|
Maturity |
10 years from the Deemed Date of Allotment |
||
Yield on Maturity |
8.0% |
8.0% compounded annually |
|
Buyback Facility |
Yes |
||
Yield on Buyback |
8.0% |
8.0% compounded annually |
|
Buyback Date |
Date following 5 years and one day from the Deemed date of allotment |
||
Buyback Amount |
Rs. 5,000 per Bond |
Rs. 7,350 per Bond |
|
Buyback Intimation Period |
The period beginning not before nine months prior to the Buyback date and ending not later than six months prior to the Buyback date |
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Tax adjusted yield to investors on Maturity
Investment Amount |
Tax Slabs |
|
|
20000 |
|
Series 1 |
Series 2 |
30.90% |
13.90% |
12.07% |
|
20.60% |
11.58% |
10.53% |
|
10.30% |
9.65% |
9.19% |
Tax adjusted yield to investors on Buyback
Investment Amount |
Tax Slabs |
|
|
20000 |
|
Series 1 |
Series 2 |
30.90% |
17.85% |
16.30% |
|
20.60% |
14.00% |
13.11% |
|
10.30% |
10.77% |
10.38% |
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