LIC Infrastructure Bonds Review

LIC Infrastructure Bonds Review

After L&T, IFCI & IDFC, LIC is also planning to launch long term tax-free infrastructure bonds. However, up to now it has not launched the infrastructure bonds but very soon probably in 2011 it will launch these bonds.

The main advantage of these Tax-free bonds is that they fall under Section 80CCF of income tax and that’s why investment up to Rs.20,000 per annum in these bonds is 100% tax free and this 20k is beyond the limit of Rs.1 lakh of Section 80C.

Here are the key features of these tax-free infrastructure bonds.

• Term: 10 years
• Minimum lock in period: 5 years
• Loan on Bond: After 5 years
• Interest Rate: 7.85%-7.95% after tax.
• Exit options: Buy back or through Demat account
• Open for Individual or HUF.

Any individual or HUF can invest in LIC’s Infrastructure Bonds Between Rs.5000 – Rs.20,000/- This will be over the Rs.1 lakh deduction allowed under Section 80C.

How much tax can you save under Section 80CCF?

Well, if you fall in the highest tax bracket (30%) than you can save Rs.6000 of more tax and minimum you can save Rs.2000 of tax by investing in these tax free bonds.

The minimum lock-in period of these types of bonds is 5 years and after that you can sell them in the secondary market. And you can also take a loan against these bonds after 5 years.

My Opinion -

If your main purpose is the Tax Planning than these are the best financial instruments to save more tax beyond 1 lakh limit of section 80C. So get ready to invest in these bonds. LIC is really a fundamentally strong company and these bonds are really great.