Well, so here is March and just a month left to finish your tax planning for the current financial year. Section 80CCF offers an additional tax benefit of Rs. 20,000 over and above the Rs. 1,00,000 under Section 80C. If you are planning to avail of this additional exemption this year, and have missed the earlier issues by various companies, here is another one from Power Finance Corporation, for you to invest before the year closes.
Power Finance Corporation is a leading public sector undertaking involved in financing the power sector. The company aims to raise Rs. 5,300 crores, from this issue
Issue Open Date: February 24, 2011
Issue Close Date: March 22, 2011
Overview of the Bond Issue
The bond issue is very similar to the other earlier Infrastructure bond issues from L&T, IDFC, and REC etc. It comes with an annual coupon option for investors who seek regular income and also a cumulative coupon option. As these are long term bonds, investors need to be prepared to have their money blocked for the tenure of the bond.
Ø Face value and Minimum Application
The bonds come with a face value of Rs. 5000. A minimum of one bond applications is to be made, and in multiples of one bond thereafter.
Ø Maturity and Lock in period
Similar to other infrastructure bonds under section 80CCF, the bonds have a maturity period of 10 years or 15 years(depending on the bond series) and an initial lock in period of 5 years.
Ø Credit Rating
The issue has been rated AAA / Stable by CRISIL and LAAA with stable outlook by ICRA.
Ø Bond Series Available
There are 4 investment options in this bond issue.
Series 1: Offering 8.30% annual coupon with a maturity of 10 years and a buyback after 5 years.
Series 2: Offering 8.30% cumulative coupon with a maturity of 10 years and a buyback after 5 years
Series 3: Offering 8.50% annual coupon with a maturity of 15 years and a buyback after 7 years.
Series 4: Offering 8.50% cumulative coupon with a maturity of 15 years and a buyback after 7 years.
Ø Listing and Trading of the Bonds
The bond is proposed to be listed on the BSE. After the lock in period of 5 years, trading is permitted, but in dematerialized form only.
Ø Option of Application in Demat as well as Physical Form
Bonds could be held in demat as well as physical form. However bonds in physical form attract a TDS for interest exceeding Rs. 2500. Also for any physical application, prescribing to KYC (Know Your Customer) norms is mandatory.
Documents required for KYC:
1) Self-attested copy of PAN card.
2) Self-attested copy of residence proof
3) Self-attested copy of cancelled cheque of the bank account to which the amounts pertaining to payment of refunds, interest and redemption applicable is to be credited.
PFC versus Earlier 80CCF Bond Issues
The most notable plus point of the Power Finance Corporation Infrastructure Bond issue is its higher interest rate in comparison to earlier issues, yielding more on maturity. Thus, investors looking at availing 80CCF tax benefit should utilise this opportunity. Of course, being a government undertaking, the bond issue scores high on safety. Thus investors need not worry about the safety of their returns.
Written by Ramya Ramachandran
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