Five-year lock-in for infrastructure bonds

12-Jul-2010

Up to Rs 20,000 can be put into tax-free issues likely from IDFC, IFCI, LIC etc The Centre has cleared infrastructure bonds issued by certain government and Reserve Bank of India (RBI)-approved entities. These bonds will have a minimum tenure of 10 years and a 5-year lock-in, the government notified on Friday. They will be eligible for tax deduction under Section 80CCF up to a maximum Rs 20,000.

The bonds will be issued by Life Insurance Corporation of India, Industrial Finance Corporation of India, Infrastructure Development Finance Company and non-banking finance companies classified as infrastructure finance companies by the RBI. This includes L&T Infrastructure Finance, which got RBI approval earlier this week. The proposal of creating funds to meet the long-term needs of infrastructure development was mooted in the Budget 2011. Finance minister Pranab Mukherjee had said in his budget speech last February that, "To promote savings as well as to ensure their utilisation for the thrust area of infrastructure, I propose to allow a deduction of an additional amount of Rs 20,000 for investment in long-term infrastructure bonds... This would be over and above the existing limit of Rs.1 lakh on tax savings."

The government aims to spend $500 billion on infrastructure in the five years to end-March 2012, and is considering doubling that figure in the five years after that.

Source : www.insuremagic.com