Most of us are not much aware
about our tax planning and ends up with some tax saving investment with poor
return at the last moment. So it’s important that you know about the options
available for our tax planning. For tax planning we Have limit of 1 lac above
1.8 lacs limit from the govt. For this saving we invest in some of the tax
saving instruments Like PF, PPF, ELSS, Life insurance, Pension, NSC, 5-year
Bank FD, etc.
Apart from this govt
has provided us an option of having tax saving above 1 lac limit in form of
investment in Infrastructure Bonds up to 20,000 under Sec. 80 CCF. So we have this option
available to save our taxes. But most of us are not sure if these infra bonds
are worth investing. Here is an analysis after which you can decide if it’s for
you or not.
I have taken example of IDFC Infrastructure bond for this
analysis. This issue is available from 21st Nov- 16th Dec
2011. Key features of this Bond are as follows..
IDFC Infra Bonds: Issue
Highlights
|
Issue opens:
|
Monday, November 21, 2011
|
Interest Rate:
|
9% p.a.
|
Issue closes:
|
Friday, December 16, 2011
|
Tenor:
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120 months from the Deemed Date of
Allotment
|
Issue Price:
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Rs.5000 per Tranche 1 Bond
|
Rating:
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"(ICRA) AAA" from ICRA
"Fitch AAA (ind)" from Fitch |
Listing on:
|
NSE and BSE
|
Issuance:
|
Dematerialized form or Physical
form.
|
Issue Type:
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Long Term Infrastructure Bond
|
Tax Benefit:
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Additional tax benefits of Rs
20,000/-Over and above the permissible deduction of Rs.1 lakh under Section
80 C
|
Registrar:
|
Karvy Computershare Private Limited
|
SPECIFIC
TERMS FOR EACH SERIES OF BONDS
|
|||||||||||||||||||||||||||||||||
|
These bonds are rated AAA by ICRA and are considered as stable
ones. Now if you consider the actual return of these bonds. The returns are as
follows for the investment of INR 5000, which gives you INR 7695 after 5 years.
TAX SLAB
|
|||
I - 10%
|
II - 20%
|
III - 30%
|
|
Tax saving
|
500
|
1000
|
1500
|
Actual Return
|
2695.00
|
2695.00
|
2695.00
|
Actual investment
|
4500.00
|
4000.00
|
3500.00
|
Percentage return( Before Tax)
|
11.33
|
13.98
|
17.07
|
Tax on interest received
|
269.50
|
539.00
|
808.50
|
Return After Tax
|
2425.50
|
2156.00
|
1886.50
|
Percentage return( After Tax)
|
10.54
|
12.34
|
14.49
|
These are the calculations based on the fact that we are
using the buying back option after 5 years. So by using this option it makes
sense to invest 20k in this infra bond. Because it’s giving you the effective
return of 10- 14.5% respectively for 10-30% tax bracket folks.
Some Cons-
- Strict lock-in period (at least 5 years till buy back option).
- Even if a bond gets listed on the exchange, the liquidity will be poor. That is, when you want to sell your bond and get the money it "may" be difficult to find a buyer.
- Buyback option is not available in all bonds offered. Hence be careful before you invest.
- Interest earned is taxable.
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