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Understanding Taxes

REC Tax Free Infrastructure Bonds under Section 80CCF

REC Bonds Public sector undertaking, Rural Electrification Corporation (REC), has launched its Long Term Infrastructure Bonds. These bonds offer a tax benefit under section 80CCF. Investments in long term infrastructure bonds provide investors a maximum tax exemption limit of Rs. 20,000 under section 80CCF, over and above what is available under section 80C

                                             

Rural Electrification Corporation was recently categorized as an Infrastructure Finance Company by the Reserve Bank of India. With its public issue of infrastructure bonds, the company plans to raise Rs 50 crores. The issue has a greenshoe option, in case of over-subscription, to issue additional bonds. The bond issue opened on 12th January 2011 and would be available for subscription till 28th March 2011.

        

Key Features of the Issue

Ø Eligible Investors

Resident Indian individuals and HUFs only.

 

Ø Credit Rating

The bonds have been rated ‘AAA /Stable’ by CRISIL, ‘CARE AAA’ by CARE, ’LAAA’ by ICRA and ‘AAA (IND) by Fitch.

 

Ø Available in Demat as well as Physical Form

REC Infrastructure bonds are available in physical as well as in demat form. So even if you do not have a demat account you could still invest in these bonds.

 

Ø Minimum Application

The bonds come with a face value of Rs. 5000. Investors would have to make a minimum investment of two bonds. i.e. Rs. 10,000.

 

Ø Lock in period and Maturity

The bonds have a lock in period of five years, and a total maturity period of ten years. They will be listed on both the NSE and the BSE. Trading of the bonds would be permissible only after the initial lock in period.

     

Ø Series Available in the Bond Issue

There are two options available for investors in the REC issue

Series 1: Offers 8% annual interest and a buyback after 5 years.

Series 2: Offers 8.10% annual interest with no buyback.

      

Ø Application Process

Application forms for the issue could be obtained from any one of the empanelled arrangers of REC. For the list of available empanelled arrangers click on the link provided here: http://www.recindia.nic.in/download/REC_infra_bonds_brokers.pdf

     

Application Forms can be deposited with all branches of UBI, IDBI & designated branches of HDFC & Canara Bank. Click below for a list of designated branches. http://www.recindia.nic.in/download/REC_infra_bonds_desig_branches.pdf

     

REC Issue at a Glance

             

REC infra bonds

      

The REC infrastructure bond, as opposed to other bonds issued earlier, provides investors only an annual interest option. No cumulative interest option is available. If you do invest in these bonds, you could claim your tax deduction under section 80CCF and utilize the annual interest earned to invest in other investment avenues. Annual interest is paid out through ECS facility, at par cheques or Demand Drafts, as per the investor’s choice.

 

Written by Ramya Ramachandran

  

Use InvestmentYogi’s quick tax calculator to get an estimate of your tax payable. Do you want to know if you are saving enough? Try out this free financial health check

         

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Comments

Comments

 

AJ said:

February 9, 2011 8:14 AM
 

jagan said:

it is good information to tax payers

February 12, 2011 6:17 AM
 

Maharaja said:

Can bond(s) like IDFC Infrastructure bond be transferred from one demat to another even though it is under lock in period??

March 10, 2011 11:51 PM
 

Bindushree said:

Is maturity of REC bonds are taxable?

March 19, 2011 4:57 AM
 

A.K.Singh said:

EXTRA TAX SAVING 20,000 THROUGH INFRA BOND,JUST GOING TO CLOSE.TO INVEST PL.CONTACT AK SINGH ON PH.22482985 M.9311099558 FOR DOOR STEP SERVICE

March 23, 2011 4:33 AM
 

avanish dalal said:

Sir,

We hgave not yet received the hard copyof investment in infra. bond 28.03.2011 till date. Bajaj Capital fellows tells us, it is not yet released by you, can you plz do the needful.

Thanks

Avanish Dalal

July 5, 2011 9:16 AM
 

Fine Shine India said:

Now you can save Rs. 7,880/- in this year by investing Rs.20,000/- in the Infrastructure Bond under section 80CCF, for free consultation and door step services for the same you can feel free contact at Mob. 9716300093, 9311099558. E.mail. : fine_shine_india@yahoo.in aksingh3867@gmail.com

October 20, 2011 6:41 PM

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