Invest in Long Term Infrastructure Bonds of IFCI, IDFC, LIC & NBFCs for Tax Exemption Section 80CCF

Investment in Bonds of IFCI, IDFC, LIC and NBFCs (Classified as Infra Finance Company) upto Rs 20,000 in addition to Rs. 1Lakh in 80C are Eligible for Tax Exemption under Section 80CCF.

Finance Minister in Union Budget had introduced a new section 80CCF under the Income Tax Act, 1961 that provide income tax deduction of Rs. 20,000 in addition to Rs 1 Lakh available under other provisions for claiming tax deductions for investments made in the Long Term Infrastructure Bonds that are notified by the central government.

This announcement will boost the infrastructure projects in India. The deduction can be claimed by individuals or HUFs for the investments made in subscribing the long term infrastructure bonds during the FY 2010-11

Which Long-term Infrastructure Bonds eligible for tax deduction?

As per the notification given by the central government, the bonds issued by following entities are eligible to subscribe as long term infrastructure bonds and eligible for a deduction under new section 80CCF

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

Benefits of Tax savings for Long Term Infrastructure Bonds

Any investment in long term infrastructure bonds upto Rs 20,000 is eligible for tax deduction from the taxable income. This means for an individual falling under 30% tax bracket will effectively save Rs 6,180 and a lower tax bracket individual of 10% will save tax upto Rs 2,060. Read more on Who Should Invest in Infrastructure Bonds?

Lock-in period & Yield of the bond

These long term infrastructure bonds will be available for tenure of minimum 10 years and the lock-in period of 5 years. It means investors can not exit from the bonds before 5 years and after 5 years they have an option to exit in the secondary market or via buyback offer given by the issuer. Investors can also pledge the bonds in some specified banks to obtain the loan against the bonds only after completing the lock-in period.

Yields of the long term infrastructure bonds and other detailed terms and conditions are specified by the issuers at the time of launch on the respective bonds. However, the important thing to note is the yield will not be higher than the yield of government securities of corresponding residual maturity schemes.

To Conclude

Any tax saving investment is always welcomed by tax payer however before investing such tools it is wise to check the returns from the investment over the long term period.


Author: Nilesh20 Aug 2010 Member Level: Gold   Points : 1

Hi All,

I am attaching Application form for Industrial Finance Corporation of India (IFCI)for people who are interested to invest.

Author: Nilesh14 Oct 2010 Member Level: Gold   Points : 1

In connection with the public issue of IDFC Infrastructure Bonds issue, AditinalTax benefit u/s 80ccf additional claim

Please take a note of the following changes.

1)Now, the investments can also be made in Physical form a(Demat is not compulsory)

Investors applying in physical form should submit the following documents compulsorily along with the application form.

a) Self attested copy of PAN Card
b) Self Attested copy of Address proof
c) Cancelled cheque leaf of the investor bank account

2)The issue has been officially extended till 22nd October’2010

This is really a great opportunity for the customers who do not have Demat accounts and who want to save tax additional in other income tax section.

Starting 15th October L&T Infrastructure Bonds are also hitting the Indian markets. The issue opens on 15th October, 2010 and closes on 2nd November, 2010.

  • Do not include your name, "with regards" etc in the comment. Write detailed comment, relevant to the topic.
  • No HTML formatting and links to other web sites are allowed.
  • This is a strictly moderated site. Absolutely no spam allowed.
  • Name: