Tax Saving Long Term Infrastructure Bond 2011-2012 (Ifci, Srei, Rec Infra Bonds)

Tax Saving Long Term Infrastructure Bond 2011-2012 (IFCI, SREI, REC Infra Bonds)

Tax saving season is back and so are the Tax saving Infra Bond Issues. Tax saving infrastructure bond issues is raining like never before. L&T and IDFC issues just closed and there are three new options available in the form of IFCI Infra bond, SREI Infra bond, REC Infra bond. Availability of so many options is bound to confuse the investor community as it gets difficult for lay man to choose the best one from the lot. Our recommendation is to use this instrument solely for tax saving purpose (Max investment of 20000) and not for investment purpose. Even though you have missed investing in L&T of IDFC issue you can go for one of the current issue. I will be presenting a comparative study of the three issues below which will help you in taking informed decision.

What Are Tax Saving Infrastructure Bonds?

Infrastructure bonds are issued by government or nongovernment institutions to fund crucial infrastructure projects related to transportation, electricity generation and other public facilities. These developments are of immense importance from countries economic growth perspective. As tax advantages are associated with these bonds funding is available at lower interest rates.

Why should you invest in Infrastructure Bond?

One should invest in these bonds as it increases the limit of Tax Exemption from Rs1 Lakh to Rs1.2 Lakh under section 80(C). The investment in these Tax Free Infrastructure Bonds are considered to be a part of section 80(C), but the 20,000 amount which comes under 80CCF will be treated over and above the 80(C) limit of Rs1 Lakh. As this extra 20000 investment is reserved only for infrastructure bonds and not for any other tax saving instrument it’s worth consideration as an investment option.

Example - Limit of investment and the amount of Tax you save

Even though there is no limit on amount you want to invest in these bonds, you get onetime tax...