What are Infrastructure bonds / infra bonds? How much do I save?
In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (“Income Tax Act“) to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010.
These long term infrastructure bonds offer an additional window of tax deduction of investments up to 20,000 for the financial year 2010-11. This deduction is over and above the 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor’s savings into infrastructure sector directly.
Here’s a little calculation I did in order to go for investment under 80CCF.
If you fall under 30% income tax slab – then if you invest 20,000 – you save directly 6,000 as income tax – For other slabs calculate accordingly
10% – 2,000
20% – 4,000
30% – 6,000
Add to this cumulative interest this fund is providing – With the Buy back option after 5 years – they are providing 8.5%(year 2011 – last year it was 8.25%) as the interest rate.
So, Sum total will be 30,074 after 5 years.
So, total benefit will be (6,000(income tax) + 10,074(Interest)) ~ 16,074