Long-term infra bonds offer additional tax relief
Economic Times
To boost the investment in the infrastructure sector and its projects, the Finance Act, 2010, had introduced a new section 80CCF under the Income Tax Act, 1961 to provide for an income tax deduction for subscription in long-term infrastructure bonds, as notified by the central government. The deduction can be claimed by an individual or a Hindu Undivided Family of up to Rs 20,000 from the taxable income in respect of the amount paid or deposited as subscription for bonds during the FY 2010-11.
Economic Times
Budget 2010 has brought focus on infrastructure bonds. The government has allowed a deduction of up to Rs 20,000 on investments in long-term infrastructure bonds. The deduction is in addition to the Rs 1 lakh allowed under Section 80C of the Income Tax Act.
ReplyDeleteThis provides an additional investment and tax-saving avenue for investors. The total savings limit for individuals is now Rs 1.2 lakhs. By investing in infrastructure or tax-saving bonds, you can save on taxes as provided under the Income Tax Act 1961. Two important factors playing a vital role while choosing infrastructure bonds to invest in are inflation and interest rate movements The motive behind investing in infrastructure bonds is to save tax. Investors who want to invest in risk-free avenues might be unwilling to venture into market-linked products.
In case the interest rate offered is six percent, you will get interest on Rs 20,000 i.e. Rs 1,200. This, however, would be on Rs 14,000 at yield of around 8.6% p.a. The interest earned is taxable in the hands of the individual.
Considering the tax savings , the effective yield on these bonds comes out to be quite good. In case you invest Rs 20,000, in these bonds, you can claim a deduction of Rs 20,000 in addition to the Section 80C deduction. At the highest tax rate of 30 percent , this translates into a saving of Rs 6,000 in taxes, which is available upfront.
Finmin says no to NRI funds for infra bonds
ReplyDeleteThe finance ministry has turned down a suggestion that government mobilise funds for infrastrucure sector from non-resident Indians through special tax-free bonds.