What is Infrastructure Bond

What is Infrastructure Bonds

What is Bond?

If you have purchased a BOND from LIC, that means you have given loan to LIC.

What is Infrastructure bond?

If the loan amount received from you is used by the company for Infrastructure development, then it is called as Infrastructure bond.

Infrastructure bonds are the Government bonds having highest security.

Why to Purchase Infrastructure Bonds?

It is mainly for Income Tax Benefits. Over and above Rs.1 lakh in 80C, you can save upto 20 thousand rupees in Infrastructure bonds under 80CCF

Where to purchase  Infrastructure Bonds?

You can contact any Mutual Fund Advisors. There are lot of licensed share brokers for this purpose.

3. Whether you need a demat account to purchase  Infrastructure Bonds?

No. Demat account is not necessary. But if you have demat account you can purchase the Infrastructure Bonds online. Otherwise you have to purchase offline.

Which companies are issuing Infrastructure bonds?

1.Industrial Finance Corporation of India (IFCI),
2. Infrastructure Development Finance Company (IDFC) and
3. Non-Banking Finance Company (NBFCs) who are classified as an infrastructure finance company by the Reserve Bank of India (RBI)
4. Life Insurance Corporation of India (LIC)

What is the minimum amount for which I should purchase this infrastructure bonds?

Normally it is in multiples of Rs. 5000. For example, you can purchase for Rs.5000 or for Rs.10,000 or  for Rs.15000 or for Rs.20,000

What are the items required  for getting these infrastructure bonds?

If you have a demat account, you can the infrastructure bond online

Else

Go to one of the offices listed in the application form along with the following:

1.         PAN Card

2.         Residence Proof

3.          A cancelled cheque leaf

4.         A cheque for the amount of the bond.

What is your advice? Whether I should invest in Infrastructure bond or not?

It depends mostly on which incometax slab you are in. There are three types of slabs 10% (for less than 5 Lac), 20% slab (for 5 to 8 lac) and 30% slab (for above 8 lac taxable income). If you are in 10% slab, then by  investing Rs.20,000 on infrastructure bond, you will save Rs. 2000. But your Rs.20000 will be locked for , say 5 years.  But if you are in 30% slab, then by investing Rs.20,000, you will save Rs. 6000 from income tax.  Note: You will get about 8% interest on your investment of Rs.20000.

About the LIC infrastructure bonds:

Term: 10 years

Minimum lock in period: 5 years

Loan on Bond: After 5 years

Interest Rate: 7.85%-7.95% after tax.

Exit options: Buy back or through Demat account

Open for Individual or HUF.