Save Taxes and Get Decent Returns by Investing in Infrastructure Bonds

Did you know that by investing in Infrastructure Bonds, you could save taxes up to 6000 Rs and get an annual return of nearly 8% on your investments !! Last year, Government had announced a new income tax section 80CCF, which allows tax exemptions on investments made in infrastructure bonds. This is over and above the Rs 1,00,000 limit allowed via Sections 80C ,80CC and 80CCD. The limit on such investments has been kept to Rs 20,000.

So, if you are an individual having an income in the 30% tax bracket(taxable income more than 8 Lakhs), you can save Rs 6,000 of tax. For people belonging to 10% tax bracket(income between Rs 1.6 to 5 lakh), this figure would be 2060 Rs, while for those falling in 20% tax bracket(income between Rs 5 to 8 lakh), tax savings will be Rs 4000.But its not without clauses, though. A 5-year lock-in period for your investment is compulsory to avail tax benefits. But the good thing is, you will be getting about 8% returns, compounded annually, on your investments. If you want to, you can also choose to lock your investments for a period of 10 years and you will be getting an additional close to 2%  annual returns, effectively a ~10% return, on your money.

But again, all this makes sense, only when you have exhausted your 1,00,000 investment limit underneath 80C* sections. But given that 80c* includes Provident Funds, Housing Loan Principle Pre-Payments and various other  common categories, its not unusual for most of us(especially in higher income brackets) to hit the Rs 1,00,000 limit. So if you are looking for long term investments promising decent returns and offering tax-benefits at the same time, Infrastructure Bonds could be the right investment avenue for you.

Invest it, forget about it, claim tax exemptions of up to 6000 Rs, sleep for 5(or 10) years and get about 8%(or 10%, if invested for 10 years) returns, compounded annually, on its maturity. Now is not that cool ??

At present, IFCI Tax Saving Long Term Infrastructure Bonds are available for purchase till 12th Jan 2011. More details can be found at their website http://www.ifciltd.com/IFCIBonds/InfrastructureBonds/CurrentIssue/tabid/218/Default.aspx

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One response to “Save Taxes and Get Decent Returns by Investing in Infrastructure Bonds

  1. Pingback: Items To Consider When Selecting Commercial Property | 95 Mortgages

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