The market is now seeing a buzz for Long Term Infrastructure Bonds. There are Infrastructure Bonds from IDFC, IIFCL and L&T already available in the market and currently open for subscription, and now Power Finance Corporation or PFC has also come out with its issue of PFC Infrastructure Bonds for Tax Saving. So what's the difference between the bonds already available from other organizations and the one now offered by PFC? Bascially nothing except the interest rates offered and the organization which is offering them.
You can read more about the details we covered for IIFCL Infrastructure Bonds and IDFC infrastructure Bonds, as they too are good option available for investments.
Review of PFC Long term Infrastructure Bonds for Tax SavingAll the investors should note that the basic working of all these various infrastructure bonds offered by these various organizations like PFC, IIFCL, IDFC, L&T, etc. remain the same. General details and working of the infrastructure bonds is covered in the article: Tax Free Infrastructure Bonds Details: Save Tax On Investments in Infra Bonds - that article covered the basic details of working of Long Term Tax Free Infrastructure Bonds and the benefits available to the investors both in terms of returns as well as saving of taxes.
The basic working of these bonds from any issuer, whether it is PFC or L&T or IDFC or IFCI, remains the same. Here are the examples of the calculations including tax benefits for investments in Infrastructure bonds :Calculations and Returns in Infrastructe Bonds Investments.
Now, once you are clear about the fundamental details, let's see the PFC Infra Bonds for Tax savings in more detail:
The bonds are being offered in 2 different series - basically meaning that investors have 2 choices/options for investments:
Series 1 - is for 10 year long bonds paying an interest rate of 8.3% per annum
Series 2 - Is for 15 year long bonds paying an interest rate of 8.5% per annum
The bonds will be listed on BSE and can be traded after the minimum lock in period of 5 years - the lock in period if for gaining the tax benefit
However, as per the rule of tax-saving investments under section 80CCF of the IT Act, tax savings will be allowed only on a maximum of 20,000 Rs. irrespective of the amount of investments made in the PFC Infrastructure Bonds.
Including tax surcharge saving, the maximum tax saved by an investor who falls in 30% tax bracket will be Rs. 6180 (on the 20K investment) - as claimed in the newspaper ad by PFC for there infrastruture bonds.
What differentiates PFC Infrastructure Bonds from the other issues like IDFC Infrastructure Bonds which are currently open?
The difference is in the interest rate or coupon rate offered on PFC bonds.
What is the security rating for the PFC Infrastructure Bonds ?
CRISIL has given a AAA Stable rating, ICRA has given LAA+ (Stable Outlook) rating to the PFC Infrastructure Bonds.
How much will I effectively save by investing in PFC Infrastructure Bonds ?
The calculations will be similar to what we covered for IDFC Infrastructure Bonds. Please see IDFC Infrastructure Bonds for Tax Saving: Calculations, Review and Details
What are the investment dates and period for PFC Infrastructure Bonds ?
The PFC Infrastructure Bonds subscription date was opened on 24th February and will close on 22nd March 2011. This will give last minute tax savers a good option to go for tax savings at the last hour. Moreover, as the budget comes out on 28th Feb, investors can get more clarity about government's direction on these tax saving schemes.
All Tax Saving Infrastructure Issues open Now:
IDFC Infrastructure Bonds for Tax Saving
IIFCL Infrastructure Bonds for Tax Saving - Closing 4th March 2011
PFC Infrastructure Bonds for Tax Saving - Closing 7th March 2011