L&T has come up with the second tranche of their infrastructure bonds, and this will be open from the 7th Feb 2011 to the 7th March 2011. The bonds are issued under section 80CCF so they will get you an additional tax relief in the form of reduction of taxable salary outside of what you get under Section 80C. L&T Infra bonds have been rated CARE AA+ by CARE which denotes low credit risk. The bonds can be purchased in the physical or Demat form, and the minimum investment needed in the bond is Rs. 5,000. There are two series on offer by L&T and the maturity period of both the series is 10 years. However, there is a buyback option that can be exercised by you at the end of either 5 or 7 years. Here are some details about this issue.
 L&T Infrastructure Bonds As you can see above the series which pays annual interest rate has a slightly lower interest payment at 8.20% when compared with the series that pays out cumulative interest. Personally, in the high interest scenario we are in I'd go for the slightly lower interest rate for getting an annual payout, but that's just my preference. You can invest in these bonds through your trading accounts like ICICI Direct, through financial advisers, or you could do it directly by filling out a form, and submitting it in one of the collection centers.  |
| IIFCL Infrastructure Bonds Issue IIFCL is also offering infrastructure bonds under section 80CCF, and their issue started on the 4th February and will close on the 4th of March. IIFCL Infrastructure bonds have a face value of Rs. 1,000 and the minimum investment needed in them is Rs. 5,000. The bonds can be issued in both physical and Demat format, and the issue has been rated AAA / Stable by CRISIL and CARE AAA by CARE, which indicates their highest safety rating. These are secured bonds, and have a lock in period of 5 years after which they will be listed on the BSE. No TDS will be deducted on bonds on Demat form, and for the bonds in paper form no TDS will be deducted if the interest is less than Rs. 2,500. Here are some details of the IIFCL Infrastructure bonds.
 IIFCL Infrastructure Bonds As you can see from the above table there are 4 series, and every series has the buyback option on it as well. The buyback means that even though the maturity period of the bond may be 10 or 15 years, you can get your principal back earlier than that. In series 1 and 2 – you can ask the company to buyback these bonds after 5 years whereas if you opt for series 3 or 4 – you can ask the company to buyback the bonds after 7 years. Since the main benefit of these 80CCF bonds is tax saving, I'm of the opinion that the series with the shorter tenure makes more sense, but this is ultimately your decision and you have to see what makes most sense for your finances. One more thing I'd like to emphasize is that these 80CCF bonds are all under the cumulative limit of Rs. 20,000. If you have already invested in some other infrastructure bond then there is no point in investing in this again since you won't get the additional tax saving.  |
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