REC Infrastructure Bonds: Section 80CCF Infra Bonds

Shiv – an independent financial adviser– left a comment yesterday informing me that REC infrastructure bonds are already available for purchase, and I thought I should do a post on this because a lot of people are looking for this information right now.

These bonds are issued with Section 80CCF benefits which means that they will get you reduction in your taxable salary of Rs. 20,000 over and above the Section 80C limit.

I have done a detailed post on Section 80CCF FAQs earlier, so if you’re new to this site or these bonds, it might be a good idea to check that out.

That being said, let’s take a look at some of the features specific to the REC infra bonds.

Open and Close Date

The REC 80CCF bond issue opened on January 12, 2011, and will close on March 28 2011.

Interest Rate

REC will offer two options – one with buyback facility, and the other one without a buyback facility, and the interest rates will differ on those options.

Here is how it will work out.

Options	With buyback after 5 years	Without buyback: Redeemable in 10 years
Interest Rate	8.00%	8.10%
Interest Payment	Yearly	Yearly
Payment Date	31st March every year	31st March every year
Buyback after	5/6/7/8/9 years	Not Applicable

Minimum and Maximum Investment

The bonds have a face value of Rs. 5,000 and the minimum you have to buy is two bonds, so the minimum investment you can do is Rs. 10,000.

There is no limit for the maximum, but since the main benefit of investing in infrastructure bonds is getting the tax break, and the cap on that is Rs. 20,000 – in a way that becomes the upper limit.

You can get more than 8% on your money in shorter time frames in bank fixed deposits these days.

Physical form or only Demat?

REC has an option of physical form along with the Demat option, so even if you don’t have a Demat account you can invest in these forms in the physical form.

Tax Proof for the REC Infrastructure bonds

When you buy the bond it will not be credited to your account immediately, and if you are buying it online you won’t get any documentation that shows you purchased the bond.

This has caused some troubles to people who had to submit tax proof at their work place. I’m not a tax expert but some people here have suggested that when they apply physically (and give their demat account number) – they get a receipt, which has been used for tax proof in their office. So, if possible, check with the people who do your taxes if that receipt will suffice, so that you don’t get into any trouble later on.

Credit Rating of REC

These bonds like other infra bonds before them are unsecured, but REC itself has been graded very well by the rating agencies, and is a Navratna as well.

AAA / Stable	CRISIL
CARE AAA	CARE
LAAA	ICRA
AAA (IND)	Fitch

How can you buy REC Infrastructure Bonds?

If you are interested in buying the REC infrastructure bonds, then you will have to fill up the physical form, and submit it to one of the collecting branches.

You will need documents like PAN, address proof, and Demat account proof to submit along with the application form.

This link has got the list of bank branches where you can submit the application form.

You can download the application form here.

Alternately, you can look for an independent financial adviser in your area who can assist you with it, or see if your online trading account allows you to invest in these through their platform or not.

Also read about the IDFC Infrastructure Bond Tranche 2.