Fixed Deposits

80CCF Infrastructure Bonds Calendar 2011

Posted on by onemintadmin

IFCI has come out with the first infrastructure bond issue of this year, and I was a bit surprised to see how early they came out with the issue this time.

They had to come out with several tranches last year because they were never able to reach their targets, and I think the same thing is going to happen this year as well.

They will come out with several tranches and so will the other players who are allowed to issue infrastructure bonds.

I had written a fairly comprehensive post on Section 80CCF infrastructure bonds FAQ last year, and you can read that post and the comments to familiarize yourself with these bonds if you aren’t already aware of them or need a refresher.

I think it’s too early to buy these infra bonds right now, and it’s better to wait for a few more issuers to come out with their issues. Don’t expect a much higher interest rate from the other issuers though because the interest that they can offer is capped, and the interest rate difference isn’t going to be much.

The other thing that I want to emphasize is that the real benefit of these bonds is that they allow you tax benefits to the tune of Rs. 20,000 over and above what you save by investing in Section 80C instruments, so if you don’t think you will be able to max out Rs. 1 lakh investment in 80C, then don’t bother with these bonds.

I’m going to review each of these issues in detail, and use this page as a calendar and summary page for every infrastructure bond issued.

If you want to see some more details on the issue then let me know and I will modify the table.

S.No. Issuer Series Tenure Open & Close Date Interest Rate
1 IDFC Tranche 2 Series 1 10 years with a buyback option at 5 years Jan 11 2012 – Feb 25 2012

8.70%
2 IDFC Tranche 2 Series 2 10 years with a buyback option at 5 years Jan 11 2012 – Feb 25 2012

8.70% compounded annually
3 Srei Infrastructure Finance Series 1 10 years with a buyback option at 5 years Dec 31st 2011 – Jan 31st 2012

8.90%
4 Srei Infrastructure Finance Series 2 10 years with a buyback option at 5 years Dec 31st 2011 – Jan 31st 2012

8.90% but compounded and will be paid at maturity
5 Srei Infrastructure Finance Series 3 15 years with a buyback option at 5 years Dec 31st 2011 – Jan 31st 2012

9.15%
6 Srei Infrastructure Finance Series 4 15 years with a buyback option at 5 years Dec 31st 2011 – Jan 31st 2012

9.15% but compounded and will be paid at maturity
7 REC Series 1 10 years with a buyback option after 5 years Dec 19 2011 – Feb 10 2012

8.95% but compounded and will be paid at maturity
8 REC Series 2 10 years with a buyback option after 5 years Dec 19 2011 – Feb 10 2012

8.95% annual
9 REC Series 3 15 years with a buyback option after 7 years Dec 19 2011 – Feb 10 2012

9.15% but compounded and will be paid at maturity
10 REC Series 4 15 years with a buyback option after 7 years Dec 19 2011 – Feb 10 2012

9.15% annual
11 L&T Infra Series 1 10 years with a buyback option after 5 years Nov 25 2011- Dec 24 2011

9.00% payable annual
12 L&T Infra Series 2 10 years with a buyback option after 5 years Nov 25 2011- Dec 24 2011

9.00% effective, but interest will not be paid annually and a lump-sum will be paid at maturity.
13 IFCI Infra Series IV Series I 10 year with 5 year buyback Nov 30 2011- Jan 16 2012

9.09% effective, but interest will not be paid annually and a lump-sum will be paid at maturity.
14 IFCI Infra Series IV Series II 10 years with a buyback option after 5 years Nov 30 2011- Jan 16 2012

9.09% payable annual
15 IFCI Infra Series IV Series III 15 years with a buyback option after 5 years Nov 30 2011- Jan 16 2012

9.16% effective, but interest will not be paid annually and a lump-sum will be paid at maturity.
16 IFCI Infra Series IV Series IV 15 years with a buyback option after 5 years Nov 30 2011- Jan 16 2012

9.16% payable annual
17 IFCI Series III – Option 1 10 years Sept 21 2011 – Nov 14 2011

8.5% effective, but interest will not be paid annually and a lump-sum will be paid at maturity.
18 IFCI Series III – Option II 10 years Sept 21 2011 – Nov 14 2011

8.5% payable annual
19 IFCI Series III – Option III 15 years Sept 21 2011 – Nov 14 2011

8.75% effective, but interest will not be paid annually and a lump-sum will be paid at maturity.
20 IFCI Series III – Option IV 15 years Sept 21 2011 – Nov 14 2011

8.75% annual
21 PFC Series 1 10 years with a buyback option after 5 years Sep 29 2011 – Nov 4 2011

8.5% interest payable annual
21 PFC Series 2 10 years with a buyback option after 5 years Sep 29 2011 – Nov 4 2011

8.5% interest cumulative payable at the end of the term
22 PFC Series 3 15 years with a buyback option after 7 years Sep 29 2011 – Nov 4 2011 8.75% payable annual
23 PFC Series 4 15 years with a buyback option after 7 years Sep 29 2011 – Nov 4 2011 8.75% cumulative payable at the end of the term
24 IDFC Series 1 10 years with a buyback option after 5 years Nov 21st2011- Dec 16 2011 9.00% payable annual
25 IDFC Series 2 10 years with a buyback option after 5 years Nov 21st2011- Dec 16 2011 9.00% effective, but interest will not be paid annually and a lump-sum will be paid at maturity.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I haven’t found their prospectus yet and this info is sourced from Moneyvriksh – when I get hold of the prospectus – I will do a more detailed post.

Update 1: Fixed Option 2 interest payment detail per Shiv’s comment

Update 2: Including Option 2 per comment from Shiv (who you can contact to invest in Infrastructure Bonds & Save Tax u/s. 80CCF at [email protected])

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164 thoughts on “80CCF Infrastructure Bonds Calendar 2011”

  1. Thanks Manshu ! This is an early bird post ! I have a Demat account with ICICI but when i checked it, the IFCI Bond was not displayed. I have noted this on earlier occasions as well with some other bonds as well (on the ICICIdirect.com website). Is there any arrangement with ICICI with those who announce these bonds that they will be promoting only some bonds preferentially on their website?

    Reply

    1. No, I don’t think these guys do it deliberately, I think it just happens that they don’t get the infrastructure set up to promote each and every bond right on day 1. I would imagine that’s what they want to do but there must be some operational hurdle in doing that.

      I don’t think there is anything other than that involved here.

      Reply

      1. Manshu – If ICICI Direct and the bond house do not agree on a commission they would not list it. Last FY (Jan 2011) they did not list a PFC bond which I applies through my other demat acc.

        Reply

  2. It would be better to wait for other bond issuances, particularly from better credits. Any idea what is the cap on the interest rates on such bonds?

    Reply

    1. I don’t remember what their rule was but it was quite close to the Repo rate – I will find that out and leave another comment – it must be in one of my older posts.

      Reply

      1. I remember during Nov 2010, the coupon from IDFC infra bond was 8% which is much higher than the then prevailing repo rate of 6.25%.

        Reply

        1. Yeah, that’s right – think Sahil is right and it’s the ten year paper – Shiv please confirm that and save me the trouble of going though old posts please!!! 🙂

          Reply

          1. Yes Manshu, Sahil is right, its not the Repo Rate rather its the yield on 10 year G-Secs. “The yield of the bond shall not exceed the yield on G-Secs of corresponding residual maturity, as reported by the FIMMDA, as on the last working day of the month immediately preceding the month of the issue of the bond.”

            Source: http://www.trpscheme.com/trp/St_Docs/Notification-No-48-2010.pdf

            Notification No. 48/2010[F.No.149/84/2010-SO(TPL)], dated 9-7-2010

          3. hehe.. God has actually sent us to do the same i.e. making others’ lives easier.. you are doing that for millions & i’m doing that for a few.. 😉

  3. Hi Manshu.. Interest Rate in Option 2 in the table above is not “Compounded Annual” rather its “Payable Annually”.

    I think this Infra Bonds Calender should make the comparison among various Infra Bond Issues quite easier & help the investors in decision making. As there is very little difference among the interest rates offered by various cos. on these Infra Bonds, people who fall in 30% or 20% tax bracket & want to save their tax should make the investment as soon as possible and need not wait for the last day of the issue to invest. Last time many people got partial allotment on L&T Infra Bonds as the co. decided to pre-close the issue.

    Also I think the Intrest Rates have either peaked out or about to peak out. Its been a long wait for the inflation & the ineterest rates to start falling but both have been quite rigid to fall.

    Reply

      1. Sure, I’ll do that.

        I’m quite confident the prospectus will get uploaded on IFCI website before the Issue closes i.e. before November 14, 2011. IFCI guys are very efficient. 😉

        Reply

    1. Hey Subodh – I’ve seen the same thing happen in the last IFCI bond issue – the NCD one – the info was present on other websites but not on their own. Normally, I wait to do a full post until I can get the prospectus but since I was using this just for the calendar I thought it was okay to go ahead and do that,

      Reply
  5. Pingback: IFCI Tax Saving Bonds

  8. One thought: if in infra bonds if one goes for cumulative option, does the interest reinvestment count as investment under 80CCF?. If it does not, then there is no point going for cumulative option, since your interest is getting reinvested at lower rate than other market instruments. The effective yield on reinvestment would be lower than on the principal.

    Reply

    1. No it doesn’t – the only benefit as far as tax is concerned is the initial 20K that you deduct from your taxable income – that’s it.

      There was an amazing amount of discussion we had here last time about these two investments option, and to me it makes more sense to get your interest paid every year, but there were several folks who didn’t want to be bothered with having to worry about what to do with the money every year and I can understand that.

      Reply

  10. What is more surprising is they dont have any ads for this issue and the information is not even updated in their website.

    Reply

    1. Hi Mithlesh, actually the issue is in the nature of Private Placement, thats the reason neither IFCI nor the Lead Arrangers can advertise this issue. Its a Compliance Call.

      But as we’ve discussed above that its quite strange that the info is not available even on the IFCI website. How IFCI functions, only God can understand & the IFCI management can explain.

      Reply

      1. thanks Shiv…
        I am planning to invest in this one anyway as i need to submit the proofs by december and i dont think i can afford to submit the investment proofs by dec by waiting for other issues to come. what do you say?

        Reply

        1. Hi Mithlesh.. I think Interest Rate offered by these cos. should not be the reason for anybody to wait to invest for Tax Saving. A 0.25% higher rate would make a difference of Rs. 50 in a year and Rs. 250 in 5 years, as against Rs. 6180 (30% Tax Bracket) or 4120 (20%) or 2060 (10%), a person would save by investing. Also I think Interest Rates are nearing their peaks so one should lock in his/her Fixed Income Investment at current rates.

          The only thing which influences my decision to invest/wait in Infra Bonds is the quality of the financials & the management of the company. Though I’m quite confident about the safety of my money if I invest in IFCI Infra Bonds, I would avoid this issue bcoz of the way they handle their Bond issues and the lack of clear & active communication.

          If I need to submit my Tax Saving Investment Proofs in a hurry, I would go for the upcoming IDFC or PFC Infra Bond issues, they are expected to come within the next 15-20 days.

          Reply

          2. PFC Infrastructure Bond Issue 2011 is out. Issue opens for subscription today (September 29, 2011) & closes on November 4, 2011. Rate of Interest – 8.5% (10 years option) & 8.75% (15 years option). Lock-in-period – 5 years & 7 years respectively.

            http://www.pfc.gov.in/writereaddata/WhatsNew/Term_Sheet_.pdf

            http://www.pfc.gov.in/writereaddata/WhatsNew/Trance_Prospectus_.pdf

            http://www.moneycontrol.com/news/business/save-tax-via-infra-bonds-pfc-hitsmarket-after-ifci_591745.html

            For more info or to invest in Infrastructure Bonds & Save Tax u/s. 80CCF, Call/SMS 9811797407 (Delhi, Gurgaon or Noida).

          3. Thank you Shiv – that was very timely – interesting to see they kept the interest rates same but added the buyback option – that sweetens the deal vis a vis IDFC.

          4. Hi Manshu.. Didnt get you!!.. IDFC doesnt have the Buyback Option ??.. Is the IDFC Prospectus out ??

          6. I seriously doubt that they wont provide the Buyback Option. I think No company would dare to make the Investors stay locked in these bonds beyond 5 years. But if IDFC opt to do that, they would seriously find very few takers.

          7. I thought that was the case, but maybe it is not – I haven’t seen the prospectus yet, i’ll search for it some more tomorrow. Sorry for getting late in replying to this comment – got a little lazy 🙂

          8. sorry …do you mean buyback option in PFC bonds? buyback option is there in IFCI as well.

          10. I checked in moneyvriksh which says
            buyback date as December 12 of the Calendar years 2016 and 2018.

          11. thanks Mithlesh – that must be correct – now that i have the offer document – i’ll try and go through it tomorrow some time.

  11. Hi Manshu,
    These bonds are unsecured, have a AA= raqting by Brickwork (Crisil rating NA). Don’t you think we should wait ?

    Reply
  14. Pingback: Power Finance Corporation (PFC) 80CCF Infrastructure Bonds

  15. Today I applied for PFC infra bonds from edelwiess.in. There they don’t have various options like IFCI. Which option they provide to me? Is there any default option for these bond issues?

    Any help is much appreciated.

    Reply

      1. Thanks for your reply. I will can see that now in Edelweiss. I am in contact with Edelweiss to find out my application status.

        Reply

  16. Is PFC a better option than IFCI ? if so which series should I opt for ? I am in the 30% tax bracket. Or should we wait for IDFC or other companies to start their issues ?

    Reply

  18. Manshu, I want to invest in PFC in physical form. I am from Kolkata. Who/where should I contact to get/submit the application form, DD etc..?

    Reply

    1. If you have a Karvy, SBI Capital, ICICI Securities or PNB Investment offices somewhere nearby – try there – they may have it since they are the lead managers.

      Reply

  19. Hi,
    Do we have to purchase these bonds every year to get deduction of that year? I mean can we use last year’s purchase for deduction?

    Reply

    1. Yes Pankaj – you have to buy them every year because the value of bonds that you purchased are what gets reduced from your taxable salary. When you bought them last time, that amount must have been reduced from your taxable salary, and that’s it. For any more tax benefits you need more investments.

      Reply

  20. Hi… The much awaited IDFC Infrastructure Bonds – Tranche 1 issue is about to hit the streets. The issue opens Novemeber 21st & closes December 16th. Rest of the details are awaited.

    Reply

    1. Thanks so much for the info Shiv – I wasn’t aware about it and will want to write about it so when you come to know about more details then please leave a comment. Thanks!!!

      Reply

      1. Terms of the “IDFC Infra Bonds – Tranche 1” issue are out. Here they are:

        Rate of Interest – 9% p.a. (payable either Annual or Cumulative)
        Issue Opens – November 21, 2011
        Issue Closes – December 16, 2011
        Credit Rating – “ICRA AAA” and “Fitch AAA”
        Minimum Investment – 2 Bonds of Face Value Rs. 5,000 each
        Listing – NSE and BSE
        Tenure and Lock-in Period – 10 years and 5 years respectively
        Buyback Amount – Rs. 7,695 (Cumulative Interest) and Rs. 5,000 (Annual Interest)
        Maturity Amount – Rs. 11,840 (Cumulative Interest) and Rs. 5,000 (Annual Interest)

        L&T Infra Tax Saving Bonds issue is also expected to hit the markets very soon.

        For more info or to invest in IDFC Infrastructure Bonds & save tax u/s 80CCF, Call/SMS 9811797407 (Gurgaon, Delhi or Noida).

        Reply

    1. IDFC with 9% is better for returns of course, but I’m not quite certain which one will be safer. Perhaps L&T Infra because of all the issues that IDFC has had in the past.

      Reply
  22. Pingback: IDFC 80CCF Tax Saving Infrastructure Bonds

  23. i will like toknow how the tax on infrast bonds will be treated in the forthcomming changes
    if one goes in for yrly payment of interest how itwill be treated for first two yrs and from 3rd yr onwards

    Reply

    1. I don’t understand your question – why would tax treatment change from the third year? It will remain the way tax is treated on interest. I mean the bond itself has nothing to do with how the tax treatment changes or maybe I don’t get what you’re asking.

      Reply

  25. Hi Manshu

    Details of L&T Infra Bonds issue are out.

    Rate of Interest – 9% p.a. (payable either Annual or Cumulative)
    Issue Opens – November 25, 2011
    Issue Closes – December 24, 2011
    Credit Rating – “ICRA AA+” and “CARE AA+”
    Minimum Investment – 5 Bonds of Face Value Rs. 1,000 each
    Listing – NSE and BSE
    Tenure and Lock-in Period – 10 years and 5 years respectively
    Buyback Amount – Rs. 1538.62 (Cumulative Int. Option after 5 years) and Rs. 1,828.04 (Cumulative Int. Option after 7 years) and Rs. 1,000 (Annual Int. Option after 5 or 7 years)
    Maturity Amount – Rs. 2,367.36 (Cumulative Int. Option) and Rs. 1,000 (Annual Int. Option)

    REC Infra Tax Saving Bonds issue is also expected to hit the markets very soon.

    For more info or to invest in IDFC, REC & L&T Infrastructure Bonds & save tax u/s 80CCF, Call/SMS 9811797407 (Gurgaon, Delhi or Noida).

    Reply

    2. Hi Manshu & Shiv,

      Thanks for your inputs. The article and the comments are very informative and helpful.

      I had wanted to invest in L&T, just considering its reputation in construction. However since it was not issued, I had planned to invest in IDFC. Now after seeing Shiv’s comment that L&T issue is going to be open and with the same % interest, I am in need some help.

      1. L&T vs IDFC – I have seen Shiv’s comment that interest % is not significant reason to wait for any other bonds. However, is there any reason to consider L&T over IDFC or vice-versa. I understand the L&T prospectus is not yet released, however any information you have on it and upcoming REC as well would be helpful.
      2. Online Vs Physical application – I have seen across various websites that the main difference between these two is that, in Physical application we receive the Physical/hardcopy Bond and Coupon to the specified address and TDS would be attracted when we redeem/buyback the bond. In the case of Online application there is no Physical/hardcopy Bond and Coupon that we would receive and that there is no TDS attracted on redeem/buyback. However one of the consultant advised me to take the Physical bond saying the opposite of what I have mentioned w.r.t TDS. I would like to avoid TDS, hence please advice. I have a demat a/c with ICICI, so I preferred investing through it, but I can apply physical if required.
      3. I also read that TDS is attracted if the interest amount exceeds Rs.2500/-. Is that information correct, if so, is it on every bond I redeem/buy back or the total redemption/buyback will be considered. For e.g., with two separate bonds, if one bond interest is Rs.2300/- (TDS not applicable) but with two bonds considered together total interest with comes to Rs.4600/- (TDS applicable)
      4. Any other important information I should be considering.

      Appreciate your patience and response.

      Thanks in advance.

      Reply

      1. Vidya,

        Let me take a crack at your questions –

        1. I’d prefer L&T to IDFC because of the somewhat tumultuous history of IDFC but to be honest I don’t think IDFC is risky or anything. In the end, there isn’t much difference in the risk profile between these bond issuers. I can only say that buy it from a different issuer than last time that’s all.

        2. Online should not attract TDS.

        3. The interest is still taxable but the company won’t deduct TDS, so to that extent you will have to add this to your income and pay appropriate tax on it.

        As far as I know TDS will not be deducted on any bonds that are Demat and listed as well. I may be wrong on this but this is to the best of my knowledge.

        Reply

        1. Thank you Manshu. I didn’t invest in Infra last year. So may be I can do it partly between L&T and IDFC.

          Please do keep us posted once you have the L&T Infra Prospectus.

          Thank you once again.

          Reply

          1. Hi Vidya

            Here you’ve the L&T Infra Bonds Prospectus link. Actually, I took the info that I posted yesterday from the prospectus itself.

            http://www.icicisecurities.com/CMT/Upload/ArticleAttachments/LT%20Infra%20Tranche%201%20Prospectus.pdf

            Moreover, in Demat form as well as the physical form, there is No TDS, unless you are investing more than Rs. 27,777 only in physical form. In Demat form, there wont be any TDS whatsoever is the interest amount. You are right in mentioning that Rs. 2,500 is the limit above which TDS would be deducted but that is in physical form. With Rs. 20,000 as an investment, one will get Rs. 1,800 as the interest in a financial year. The limit of Rs. 2,500 would breach in case the investment is above Rs. 27,777 (Rs. 2,500 / 9%). The interest earned would be taxable for sure, as per your tax slab.

            Also, in case I had to choose between IDFC and L&T, I would have gone for IDFC as my dealings related to Infra Bond issues gave me more confidence in IDFC’s management. Also, IDFC issue is rated “AAA” whereas L&T issue is rated “AA+”. So that is also a factor to keep in mind. Interest Rate in both the issues is the same at 9%.

          3. Thank you Shiv and Manshu for the prospectus. I am glad I’m learning things.
            I have decided to put partly between IDFC and L&T.

            Thanks once again.

  27. Hi Manshu

    As the corporate employees have been getting mails from their HR departments to submit Investment Proofs as per their Tax Declaration, I think Tax Planning season has officially kicked off from today. I’ve also been getting a large no. of calls from people for investment in Infrastructure Bonds. Many of these people are not able to get the application forms to invest in these bonds. So, I asked my associates – SBI Capital Securities to provide me an online link which I can share with my investors/clients. To help with the matters, I’m sharing this web link with all the readers of OneMint. I request you also to please check this link once & let me have your view about it.

    For IDFC Infra Bonds: http://www.sbicapsecu.co.in/pdfstamping/IDFCBOND_KUKREJA.aspx

    For L&T Infra Bonds:
    http://www.sbicapsecu.co.in/pdfstamping/lntinfra_kukreja.aspx

    The link takes the investors to an 8 pager application form. Investors can print the first page of the form, which is to be filled & submitted along with other relevant docs. They can also check other relevant info which is there on the ramaining pages like collection centres, Lead Managers, Lead Brokers, Financials of the Issuer, Risk Factors etc.

    In case any reader has any query regarding this link (E-Form) or wants to invest in Infrastructure Bonds – IDFC or L&T, Call/SMS 9811797407 (Gurgaon, Delhi or Noida) or mail us at [email protected]

    Reply

      1. Thanks a lot Manshu! I hope it is going to help the readers of OneMint and people who want to invest in IDFC and L&T Infrastructure Bonds. Thank you once again.

        Reply
  28. Pingback: Infrastructure Bonds Calendar

  29. Hi Manshu,
    IFCI has come out with Series -IV. You can include it in the calendar. Also adding any issues that are anticipated to the list would be useful.

    Reply

    1. Thanks Girish – I’ll add that today.

      Not going to add future issues because I don’t have any info other than what’s reported in newspapers about what may potentially come out.

      Reply

      1. Hi Manshu.. what I understand with Ravi’s query is that he holds a joint demat account and wants to invest in Infra Bonds in his name as the sole applicant. If my understanding is right, I’m afraid he cannot do that.

        The application form must have the applicant(s) name(s) in the same order as it is there in the Demat account, otherwise the application will get rejected .

        Reply

        1. oh I am sorry, I didn’t realize it – you must be correct. So if he applies for the bond in the same order who will be eligible for tax deduction?

          I apologize Ravi.

          P.S. Check out today’s post.

          Reply

          2. Thanks Manju & Shiv for the timely response.

            My demat is not linked with any trading account.

            Few add-on queries:
            1. During redemption or, buyback, what will be the procedure?
            2. In which account will I get the credit (money)?
            3. Will I require co-demat holder signature at the time of redemption?
            4. I believe if co-applicant sign is required than I wont be able to transfer it to other demat account.

            FYI:
            Last year I invested in IFCI infra bonds under single demat holding, now as I am about to close that demat account (high AMC charges), I could not transfer it to another demat account (joint holding, me as first holder) due to lock in status.
            I had to apply for remat & today I received the physical bond certificate.

          4. No problem and I deeply appreciate your comment. It’s amazing how many people make that mistake and in fact last week someone wrote an entire post quoting me and called me Manish! I then emailed him that you have my name wrong and it still took him a couple of times to figure out what he was doing wrong!!! LOL

          6. No, it was something else, he explained why he made the mistake but I don’t recall what it was – I think something to do with having an earlier email or something. Not important though.

          7. Hi Mr. Ravi

            1. If you are opting for the Buyback Facility in advance and on maturity, no action will be required at your end. The registrar will contact you and get the redemption done for you.
            2. Money will get credited in the bank account which is linked to your Demat account.
            3. Yes, the co-applicant’s signature will be required at the time of redemption.
            4. Yes, you wont be able to transfer it to any other Demat account without the co-applicant’s signature.

  31. Hi Manshu,

    Many thanks for the information on infra bonds. It is very useful for tax planning.

    I am holding 4 units of IDFC infrastructure bonds & few Mutual funds with ICICIDirect demat account. Now I want to close this demat account and transfer the current holdings to Indiabulls demat account.

    1. Can you please tell me whether I can transfer infra bonds? If yes, what is the procedure? Where do the interest & redemption money gets credited?
    2. Can you please tell me whether I can transfer mutual funds? If yes, what is the procedure?

    Thanks in advance,
    Muneswar

    Reply

  33. Hey manshu!

    how you doing? Looks like IFCI bond status is out. I got some money 130rs credited to my account with the name of IFCI. But , there are no links on status anywhere yet.

    Reply

      1. Hi Manshu,
        good morning!
        Just to let you know the IFCI bonds have been alloted to the DMAT account. I got an sms from CDSL regarding the allotment of the bonds. However i am not sure about whether the status can be checked

        Reply
  35. Pingback: REC 80CCF Infrastructure Bonds

  36. Hi Manshu,

    I would like to know whether it is better to invest in L&T Infra Bonds issue closing tommorow, or should I opt for applying in IFCI or REC Infra Bond issue which are still available for subscription, though both of them are private placement & unsecured in nature.

    In case it is fine to apply for bonds issued by IFCI or REC, should I go in for 10 or 15 year bond series & which one is better?

    Also should the application be for regular annual interest or interest on maturity?

    What is the tax implications, & is there any TDS on maturity on bonds applied under cumulative option?

    Please revert back at the earliest, as I need to invest in this month itself & submit proof of it.

    Thanks,
    Manish

    Reply

    1. Manish – these are decisions that you must take based on what you are comfortable with – I generally don’t tell anyone here what they should do because there are only a few things that are absolutely good for everyone.

      For most things the answer is in the shades of gray and depends on what you want and what your preference is.

      Reply

    2. Hi Manish… If I were at your place, I would have invested in IDFC or L&T Infra Bonds as my first preferences, then in REC Bonds & lastly in IFCI Bonds. The biggest reason for me to invest in Infra Bonds is the Tax Savings these bonds provide, so I would take the tax benefit & cash out of it as soon as possible. The minimum lock-in period is 5 years so I would avoid a lock-in period of 7 years. Also, annual interest option gives me something back every year, so I’ll take that.

      As far as my understanding goes, there is No TDS if either the bonds are taken in the Demat mode or the interest earned every year is Rs. 2500 or less, in the physical mode. So, if the interest is 8.95% (as it is in REC Bonds), the investment should not exceed Rs. 27933.

      Reply

  37. Hi Manshu,

    In addition to my query given above, I would like to ask that should we invest in the bonds in physical or demat mode?

    Also is the any TDS on annual interest exceeding Rs. 2500 per annum, in case the bonds are held in physical form?

    Regards,
    Manish

    Reply

    2. I would take these bonds in the Demat mode as it is safe & easier to keep the investments in Demat mode. Also there is a chance of Capital Gains on listing, if the interest rates fall drastically between today & the Buyback date.

      Reply

  38. Any idea about LIC Infrastructure bonds? Right from last year there has been a suspense as to when they are going to launch it! Please let us know if there is any update.

    Reply

    1. I’ve not heard or read anything that suggests they are going to come out with that issue even this year. Just curious as to why you’re waiting for that issue?

      Reply

      1. Manshu,

        Thanks for the reply. No specific reason, was following it up last financial year so that I can take it then, but looks like they have not started issuing it till now. I was also curious to know what interest rate they may offer, as they claim that it would be one of the best 🙂

        Reply

        1. So the thing that happened last year Divya was that since these bonds are limited on the rate of interest they can offer – LIC said we will juice up returns by offering people a free policy and the regulators objected to that. I don’t remember now if they specifically objected to this gimmick or just the fact that LIC wanted to issue infra bonds. And after that there was no news on that or at least I didn’t see or read anything.

          Reply

  39. Hi Manshu/Shiv,

    Q1. I would like to know how the interest earned on these bonds will be taxed in case of “compounded” option. Since the money will be reinvested and will not come to your account how would you know how much interest you have earned and hence how to pay tax on it?

    Q2. (a)If the interest rate is guaranteed then what is the meaning of unsecured. (b) If the interest rate is guaranteed then what is the meaning of ratings by various agencies? (c) If the ineterest rate is guaranteed then isn’t it best to go with the bond providing highest interest rate (IFCI series IV above), however small it is.

    Q3 How the Tax free bonds and Long term infrastructure bond is different?

    Q4 What is Gsec and what is its significance?

    Reply

    1. Hi Ankur.. Your queries are a bit difficult to answer but I’ll try my best to answer in the most simple manner..

      1) Have you ever invested in Post Office NSCs – National Saving Certificates? The interest portion gets compounded there. There is a special interest calculator in NSCs for Taxation purposes and every taxpayer has to include interest income as per that calculator. In the absence of any calculator/clarity for Infrastructure Bonds, you can either pay tax on the interest income annually or once you redeem these bonds after 5/10 years. This is what I know about it.

      2) Who says the interest, or for that matter the principal itself, is guaranteed ?? They just say that the company will pay 9% (or 8.95% or 9.09%) as the interest and your principal amount after the Buyback period/Maturity period. Nobody gives any guarantee of the principal or the interest payments.

      Now comes into picture the “Secured/Unsecured” part and the “Credit Ratings”. In case of issuer’s extremely unhealthy financial condition like Bankruptcy, if the issuer company’s equivalent assets can be liquidated for paying back the bondholders’ initial investments, then the issue is called Secured. If not then it is Unsecured.

      Credit Ratings are based on several factors like quality of issuer’s financial statements, whether the issuer is backed by the parent or not, the issue is backed by some valuable assets or not, whether the issue is a public issue or private placement and so many other factors that even some analysts would find it hard to judge.

      Given a choice between 9% IDFC/L&T issue and 9.09% IFCI issue, I would go for IDFC/L&T issue as those bonds were Secured and I trust IDFC’s/L&T’s management more than IFCI’s.

      3) This query has been answered here on OneMint many a times now but readers keep on asking it again & again. Tax-Free Bonds investment does not provide any tax exemption under any section of I-T Act. Its just that the interest earned is tax-free. Whereas, Infra Bonds provide tax exemption u/s 80CCF but the interest earned is fully taxable as per the investor’s tax slab.

      4) G-Secs are the Government Securities issued by the RBI on behalf of the Government of India. Whenever the Govt. requires funds for some kind of expenditure, it issues these securities and financial institutions like Mutual Funds, Insurance Cos. etc. invest in these securities. G-Secs (and more specifically 10-year G-Secs) are considered as the Benchmark for many Fixed Income products.

      I hope I could answer most of your queries.

      Reply

    1. All Infra Bond issues have Buyback Option after 5 years. IFCI’s extra Rs. 18 (against 9%) or 28 (against 8.95%) should not make much difference to a Tax Saving investor.

      Reply

      1. Hi Shiv,

        Thanks for the reply.

        I have other problem related to Income tax , Is it OK to ask here??

        Regards,
        Ankur

        Reply

          1. Dear Shiv/Manush,

            My query is:

            I was working in a company till sep2011, while leaving that company I made a payment of 2.43lac to that company against bond pay and notice pay.

            Can I deduct this amount from my income to arrive at my net taxable income?

            Regards,
            Ankur

          4. I dont think so the amount paid to the company against bond pay & notice pay is allowed as a deduction from income to arrive at net taxable income, as such amount is required to be paid for breach of contract entered into between the employer & employee.

          5. Hi Ankur.. At this point of time I’m unaware of its treatment but I’ll get back to you on this. I think you should get some tax relief while calculating your taxable income.

          7. Hi Ankur… I’ll definitely come back to you on this. I’m not getting enough time to work on it. You’ll get my response on this by coming sunday.

  41. Hi Manshu / Shiv,

    Indian infrastructure financing company SREI Infrastructure Finance Ltd’s long-term infrastructure bonds issue, through which it plans to raise Rs 3 billion in the first tranche, hit the market on Saturday, 31/12/2011.

    The bonds have a face value of Rs 1,000 and comes with two maturity periods of 10 and 15 years and a lock-in period of five years. The bonds will be issued in four series with an annual interest rate of 8.90% for series 1 and 2, and 9.15% for series 3 and 4.The issue will remain open for subscription till January 31.

    Regards,

    Manish.

    Reply

    1. Hi Manish… ya I checked it last week only. Again, I would prefer 8.95% REC Bonds over 8.9% SREI Infra Bonds.

      Reply

    2. Thanks for that info Manish – I think I should do a post on this as well since I’ve written about all the other infra bonds prior to this. Will update the calendar as well – thanks!

      Reply

  42. Hi Shiv,
    Given that SREI bonds are secured while REC/IFCI are unsecured, would REC still be the best option?

    Hi Manshu,
    Would the secured/unsecured factor be significant enough to include in the comparison table that you have made?

    Regards,

    Haresh.

    Reply

    1. At present REC bonds are the best option, although they are unsecured, as it is a private placement, where as the SREI bonds is a public issue, which can only be made against security of underlying assets & hence it is secured.

      Secured/Unsecured bonds hence does not really make a difference in such a case & cannot be compared. All unsecured bonds are being issued by government undertakings.

      Reply

      1. Hi Manish.. it is not always be the case. PFC issued Infra Bonds which was a Public Issue and the bonds were Secured.

        Reply

    2. Hi Haresh.. SREI Infra Bonds are Secured as the equivalent assets must have been leveraged to make it secured but I would still say REC offering is better as it is a Govt. controlled corporation and also the rate of interest is higher. Secured & Unsecured thing does make a difference but not that much. If a similar company like PFC comes out with a Secured Infra Bonds @ 8.90%, I would take that.

      Reply

  43. I have heard about IDBI infrastructure bonds and that last year they had come during Jan. Any information regarding them? I dont see them in the infrastructure bond calendar either. My husband has missed to apply for other bonds that were open earlier, hence thinking of either IFCI or if IDBI would open in near future. Please suggest.

    Thanks,
    Sunita

    Reply

    1. Hi… ya it is coming from January 11th, with a lower rate of interest of 8.70% as compared to 9% which was there in the 1st tranche. L&T Infra Bonds – Tranche 2 is also opening on January 10th with same 8.70% interest rate. Other terms are absolutely same as they were in Tranche 1.

      Reply
  45. Pingback: IDFC 80CCF Infra Bonds Tranche 2 Details

  46. REC,IDFC, L&T infrasructure bonds are available in the market and REC offers sightly high interest than the rest two,could you plz tell me which one is more safe invest?

    thanks
    jolly

    Reply

    1. Hi Jolly… all these issues are quite safe to invest. IDFC issue is ‘AAA’ rated and ‘Secured’, L&T issue is ‘AA+’ rated and ‘Secured’ and REC issue, though not rated and ‘Unsecured’, is also quite safe as it comes from “A Navratna Public Sector Enterprise”. It is very difficult to conclude which one is MORE SAFE to invest among these three.

      Reply

  48. Hi Manshu… IFCI has extended the closure date of its Infra Bonds issue to February 8th, 2012. It is a good news for people who wanted to invest in IFCI bonds at 9.09% or 9.16% with 5 years lock-in period. I wonder why IDFC and L&T did not extend their closure dates in December when it was known to them that they wont be able to offer 9% rate of interest in the coming months due to falling G-Sec yields. They could have collected much more money from the investors.

    Reply

    1. Hi Mr. Karthik.. IDFC Tranche 2 issue is supposed to close on February 25th, 2012, from the beginning itself. Hence, it is not an extension.

      Reply

    1. Hi Ankur.. I’m yet to get any convincing answer to your query. I consulted 3-4 CAs in my circle and they were also unaware of its treatment. In case I get a concrete reply with some documented evidence, I’ll surely let you know.

      Reply

  51. hi manshu,
    i want to clear my doubts regarding IT deduction under section 80 CCF and 80 D.
    After so much inquiry I found the line -‘Rs.20000 is deductible from taxable income’ in case of 80 ccf and ‘Rs.15000 (individual) and Rs.20000 (parents) is deductible from taxable income’ in case of 80 D.

    for example :-
    Ist example
    if my annual income is Rs.400000
    (-) deduction upto Rs.290000 (190000+100000)
    (-) investment under 80ccf Rs. 20000 (deduction under infra bond)

    Total taxable income Rs.90000
    income tax will be Rs.9000 (10%)

    2nd example

    if my annual income is Rs.400000
    (-) deduction upto Rs.290000 (190000+100000)
    (-) investment under 80ccf Rs. 2060 (10.3% of 20000) (deduction under infra
    bond)
    Total taxable income Rs.107940
    income tax will be Rs.10794 (10%)

    my question is which example is correct and right and also in case of 80d which example will be applicable.

    kindly reply me soon

    thanks

    Reply

  52. Hi Manshu.. IDFC has approved the prospectus for Tranche 3 of Infrastructure Bonds which will open on March 19th & close on March 30th.

    Reply

  53. sir , i was bought l&t infra bond rs 20000/ at dec/11. through karvy stock broking . still today i du not received any original bond cirty ficate. so pl. confirm what is the status of my bond. i am leaving at. village. my cell no is 7046599890 mr chandubhai r patel. call soon or reply pl. my email
    my acknoledge deatils as below
    apli.no 24815946 rs, 20000/ cumulative option.cheque from dena bank.
    thanks
    c r patel.

    Reply

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