IDFC has launched Tranche 2 of Long Term Infrastructure Bonds for FY 2011-12. These bonds provide Tax Deduction u/s 80CCF, over and above Rs. 1,00,000 deduction u/s 80C and an investor can potentially save tax up to Rs. 6,180 by investing Rs. 20,000. The rate of interest of 8.70% on offer is somewhat lower than 9% rate of interest IDFC offered in the last issue, which closed on December 16th, 2011. That is the only noticeable difference between the last 9% issue and this 8.70% issue. The fall in the interest rate is due to a fall in the Benchmark 10-year G-Sec yield, which has fallen from a high of around 9% in November to around 8.40% by December-end.
Size of the Issue, Opening and Closing Dates
IDFC will try to mop up Rs. 4400 Crores from these Infra Bonds during the rest of the financial year. IDFC Infra Bonds – Tranche 2 issue started from 11th January, 2012 and will close on 25th February, 2012.
|Interest Rate||8.70% payable annually||8.70% compounded annually|
|Maturity Period||10 years||10 years|
|Buyback Period||5 years||5 years|
|Face Value||Rs. 5000||Rs. 5000|
|Buyback Amount||Rs. 5000||Rs. 7590|
|Maturity Amount||Rs. 5000||Rs. 11515|
Taxability, Ratings & Lock-in Period
Mind it: These are Tax Saving bonds u/s. 80CCF and not Tax-Free bonds. The interest is taxable in the hands of the holder as per the tax slab applicable. But there is no TDS on these bonds. Fitch and ICRA have given “AAA” rating to the issue – which is the highest rating for any such issues. The lock-in period remains 5 years only.
Other Options Available
As compared to 8.70% IDFC Bonds, L&T is also offering the same rate of 8.70% whereas REC is offering 8.95% and 9.15% with 10 years and 15 years maturity periods respectively. Private infrastructure lender SREI Infra is also there in the market with 8.90% (10 years maturity period) and 9.15% (15 years maturity period). PTC India Financial Services (PFS) is also offering Infra Bonds with 8.93% interest (10 years) and 9.16% interest (15 years).
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