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L&T Infra Bonds Under Section 80CCF (Series II)

L&T Infra BondsL&T Infrastructure Finance Company is out with yet another issue of long term infrastructure bonds, as per section 80CCF of the Income Tax Act. Section 80CCF entitles tax payers an additional deduction of Rs. 20,000 for investments in long term infrastructure bonds. This means a saving of up to Rs. 6180 on your investment (calculated at 30% marginal rate of tax and 3% education cess).

             

The Issue in Detail

L&T Infrastructure Finance is a fully owned unit of Indian engineering company Larsen & Toubro. The company had already issued similar bonds in November 2010. This second retail bond issue is open for investors from 7th Feb 2011, and closes on 7th Feb 2011.

                 

Key Features of the Issue

Ø Who can apply

Resident Indians and HUF’s only.

        

Ø Credit rating

The bonds have been rated by two leading agencies. It has a rating of CARE AA+ and ICRA ratings of ICRA LAA+, indicating high safety for timely servicing of debt obligations with high credit quality and low credit risk.

       

Ø Available in Demat as well as physical form

Investors can apply for the bonds in physical as well as in demat form. Bonds in physical form however attract a TDS for interest exceeding Rs. 2500.

        

Ø Minimum Application

The bonds come with a face value of Rs. 1,000. Investors have to subscribe to a minimum of five bonds, either in the same series or across the series.

       

Ø Lock in period and maturity

The bonds have a lock-in period of 5 years and a maturity period of 10 years, from the date of allotment. It has been proposed that the bonds will be listed on the NSE. They can be traded after the initial lock-in of 5 years. The bonds could be pledged as security to obtain a loan after the lock in period of five years.

         

Ø Buyback Option

There is a buyback option at the end of 5 years or 7 years, depending on the series chosen.

           

Ø Bond series available

There are two series options for investors in this issue.

Series 1: Offering 8.20% annual coupon with a buyback option at the end of 5 years and at the end of 7 years.
Series 2: Offering 8.30% cumulative coupon with a buyback option at the end of 5 years and at the end of 7 years.

           

Ø Yield post tax

Considering the tax benefit the bond offers, increases the effective net yield post tax on the bond, making it attractive for investors. The below table illustrates the yield post tax.

Infra bond yield

Yield on buyback

*Source: L&T Infra Tax Saving Bonds 2010 Prospectus

            

Ø Application Process

Application forms could be obtained and submitted at the following banks*, which serve as collection centres for investors.

• Axis Bank • DBS Bank • HDFC Bank • HSBC Bank • ICICI Bank • IDBI Bank • ING Bank • SBI Bank

                

*Refer L&T’s website http://www.ltinfrabond.com/contact.php to locate the branch closest to you.

  

Alternatively online applications could be submitted, if you have an online trading account. A toll free number has been set up by the company to answer queries of investors.

 

Investors could also download the form from the company website, print it, fill it up and submit it at the nearest collection centre. Check L&T Infra website for further information.

  

Issue at a glance 

     

L&T Infra Bonds

*Source: L&T Infra Tax Saving Bonds 2010 Prospectus

                 

Written for InvestmentYogi by Ramya Ramachandran

                      

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Published Feb 08 2011


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