Tax-saving bonds as the name suggests helps an investor to save tax as per Section 80CCF of the Income Tax Act thus reducing an investor's overall tax outgo. The investment option comes with a 5-year lock in and is suitable for those looking at long-term returns instead of immediate gains. These tax-saving bonds earn decent returns for investors and carry no risk.
Section 80CCF details: The section introduced under the Income Tax Act 2011 provides investors with tax savings to the extent of Rs. 20,000 in respect of investments made in infrastructure and other tax-saving bonds. Saying this we mean, that investors can reduce a maximum of this stipulated amount from their gross taxable income and hence lower their tax-outgo for a particular financial year.
The tax benefits provided as part of section 80CCF complements tax deduction allowed under section 80C upto the extent of Rs. 1.5 lakh in respect of various investments and expenses in a year.
And these tax saving bonds can be a win-win deal for you as an investor in light of the fact that these carry no risk and also as the infrastructure sector in the country is fast booming, the returns from the investment are most likely to be decent.
So, here are listed a few tax-saving bonds for you to consider for purchase:
1. Housing and Urban Development Corporation N4 Series bonds: Backed by a credit rating of "CARE AA+" by CARE and "IND AA+" by IRRPL, these bonds can be a good bet. The 10-year tenure bonds offer a coupon rate of 7.34% and was last seen trading higher by 0.33% at Rs. 1050.10. Since its allotment date of February 16, 2013, the bond is trading at an average trading price of Rs. 1051.94
2. IFCI NJ Series: The bond by Industrial Financial Corporation of India enjoys a credit rating of "BWR AA- (Outlook: Stable)" by Brickwork & "[ICRA]A (Stable)" by ICRA. The bond was last seen trading at Rs. 1000 with a decline of 0.1%. The coupon rate of these bonds is highly attractive at 9.35%. It is to be noted that these bonds come with a lower tenure of just 5 years.
3. IRFC NA Series bond: Another infrastructure company bond by Indian Railways Finance Corporation can be a good deal with a coupon offering of 8.65%. The tenure of these bonds is comparatively higher at 15 years. And the bond features CRISIL AAA/Stable" by CRISIL, "[ICRA] AAA" by ICRA & "CARE AAA" by CARE. Average trading price of the bond is Rs. 1200.51, meanwhile it was trading higher by 0.45% against yesterday's close at Rs. 1203.90.
4. India Infoline Finance NA Series Bond: These bonds offer a coupon rate of as high as 12%. Issued at a price of Rs. 1000, the bond has a tenure of 5 years. These bonds feature a credit rating of "CARE AA (Outlook:Stable)" by CARE for an amount of up to Rs.1200 Crores and "BWR AA (Outlook:Stable)" by Brickwork for an amount of up to Rs. 1050 Crores. The bond was last seen trading down by 0.27% at Rs. 1017.25 which is its average trading price range also.
5. India Infoline Housing Finance N1 Series: Awarded CRISIL AA-/Stable" by CRISIL & "CARE AA-" by CARE, these bonds feature coupon rate of 11.52% and carry a tenure of 5 years or 60 months. The bond was seen trading at Rs. 1025 close to its average trading price of Rs. 1025.49