Low coupon rates makes IIFCL tax free bonds un attractive

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Low coupon rates makes IIFCL tax free bonds un attractive
India Infrastructure Finance Company (IIFCL) has come up with tax free bonds in order to provide long term financial assistance to infrastructure projects in various sectors.

The company is wholly owned by government of India. The tax free bonds issue opens on December 26, 2012 and closes on January 11, 2013.

Retail investors who have missed opportunity in investing in tax free bond like Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) can hop on this opportunity. However, interest rates are lower than offered by REC.

In this tax free free bonds retail investors will receive 0.5% higher interest for investment upto to Rs 10 lakh.

The IIFCL tax free bond interest rates are paid annually with coupon of 7.69%, 7.86% and 7.90% to retail investors for tenure of 10 years, 15 years and 20 years, respectively.

Highlights of tax free bonds

  • Minimum application amount is Rs 5000/-
  • Bonds proposed to be listed and traded on BSE
  • Issuance in both physical and Demat form
  • No lock in period
  • Interest earned is eligible for tax benefits u/s 10(15)(iv)(h) of the Income Tax Act 1961

Credit ratings:

ICRA, CARE, Brickworks has assigned a rating of AAA (Stable) to the Bonds. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.

Who can invest?

It's attractive only for investors in the 30% tax bracket, because of effective returns on these bonds are higher when compared to bank deposits (after deducting tax).


Read more about: iifcl, tax free bonds
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