Income Tax saving – Infrastructure Bonds

Income Tax
CBDT has notified New infrastructure Bonds u/s 80CCF.An Individual or HUF can invest in these newinfrastructureBonds upto Rs 20000/- in a Financial years.Main features of this new section and new notification is given below
  1. New section can be availed by individual or HUF only.
  2. 20000/- rs can be invested in aFinancial yearto avail deduction under section 80CCF
  3. 20000/- Limit is in addition to 100000/- Limit of setion 80C,80CCC,80CCD
  4. Tenure of the Bonds will be 10 Years.
  5. However Lock in period is 5 years ,after 5 years investor can withdraw money from the bonds
  6. After lock in period ,Investor can take loan against these Bonds
  7. Issuer of the Bonds is LIC,IFCI,IDFC and other NBFCclassifiedas infrastructure company.
  8. Permanent account Number is must to apply these bonds.
  9. Yield of the bond – The yield of the bond shall not exceed the yield ongovernment securitiesof corresponding residual maturity, as reported by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), as on the last working day of the month immediately preceding the month of the issue of the bond.
 
Section 80CCF of the Income-tax Act, 1961 – Deduction – In respect of subscription to long-terminfrastructurebonds – Notified long-terminfrastructurebond



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




In exercise of the powers conferred by section 80CCF of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies bonds, subject to the following conditions, as long-terminfrastructurebonds for the purposes of the said section namely :-

(a) Name of the bond – The name of the bond shall be “Long-termInfrastructureBond”.
(b) Issuer of the bond – The bond shall be issued by :-
(i) Industrial Finance Corporation of India;
(ii)Life Insurance Corporation of India;
(iii)InfrastructureDevelopment Finance Company Limited;
(iv) a Non-Banking Finance Companyclassifiedas anInfrastructureFinance Company by theReserve Bank of India;

(c) Limit on issuance – (i) The bond will be issued duringfinancial year2010-11;

(ii) the volume of issuance during thefinancial yearshall be restricted to twenty-five per cent of the incrementalinfrastructureinvestments made by the issuer during thefinancial year2009-10;

(iii) ‘Investment’ for the purposes of this limit include loans, bonds, other forms of debt, quasi-equity, preference equity and equity.

(d) Tenure of the bond. – (i) A minimum period of ten years:


(ii) the minimum lock-in period for an investor shall be five years:

(iii) after the lock in, the investor may exit either through the secondary market or through a buyback facility, specified by the issuer in the issue document at the time of issue;

(iv) the bond shall also be allowed as pledge or lien or hypothecation for obtaining loans from Scheduled Commercial Banks, after the said lock-in period;

(e) Permanent Account Number (PAN) to be furnished – It shall be mandatory for the subscribers to furnish there PAN to the issuer;

(f) Yield of the bond – The yield of the bond shall not exceed the yield ongovernment securitiesof corresponding residual maturity, as reported by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), as on the last working day of the month immediately preceding the month of the issue of the bond;

(g) End-use of proceeds and reporting or monitoring mechanism – (i) The proceeds shall be utilizes towards ‘infrastructurelending’ as defined by theReserve Bank of Indiain the Guidelines : issued by it ;

(ii) the end-use shall be duly reported in the Annual Reports and other reports submitted by the issuer to the Regulatory Authority concerned, and specifically certified by the Statutory Auditor of the issuer;

(iii) the issuer shall also file these along with term sheets to theInfrastructureDivision, Department of Economic Affairs, Ministry of Finance within three months from the end offinancial year.

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