IDFC 80CCF Tax Saving Infrastructure Bonds - By: Nandha

Under Income Tax Act, 1961 Section 80CCF, IDFC has introduced infrastructure bonds for subscription. But the bonds offered by IDFC are quite different from other bonds available for subscription because the interest rates of these bonds are higher than other bonds introduced till now. The interest rate of these bonds is 9 percent per annum and the company has set the maturity period of the bonds for 10 years. Alike other infrastructure bonds the interest rates will be paid annually or through cumulative options and for the investors buyback option is also available but it can be availed after the completion of lock in period of five years.

Initially, these bonds of IDFC were also available on online platforms such as Edelweiss and ICICI Direct just to make subscription process easier for the investors. The only thing the investors need to do is to download the application form from the websites and submit it in the collection center after filling it. After the completion of lock in period of five years these bonds will get listed on exchanges like BSE and NSE automatically. ICRA has rated this bonds AAA and Fitch also rated this bonds AAA. To apply for these 80CCF bonds the investor needs to invest Rs 20,000. So, it is better to invest in these bonds rather than investing in some other fixed deposits where the investors don’t get any lock in period and the interest rates are also not very high like these bonds.

There are many individuals those who want to know whether the interest earned through these bonds will be free from tax or they will be taxable. So, the answer to this question is that the interest earned from these bonds will not be free from tax as they are taxable. Every year the investor earns interest from these bonds is taxable. But they will avail the tax benefit every year because the amount invested to purchase these bonds will be deducted from their salary which is taxable therefore they need to pay less tax.
There are many investors those who want to know whether they need to pay tax or not if they avail the option of buyback. Answer to this question is that the option of buyback doesn’t affect the tax set for the bonds. For instance, if the investor goes for annual interest option then the interest earned will be taxable and if cumulative option is opted for then capital gained will be taxed. Moreover, the face value is not taxable.

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