Good response for L&T Long Term infrastructure bonds

Current open Long Term Infra Bond Application form

AFTER the success of IDFC’s long-term infrastructure bonds, L&T Infrastructure Finance’s infra bonds are attracting good response, indicating retail investors preference for safe and stable investment options, amid a weak equity market.

L&T Infrastructure Finance, a finance subsidiary of Larsen & Toubro (L&T), expects to mobilise around Rs 600 crore from the long term infrastructure bonds, which closes on December 24, according to a person close to the development.

He said the investor response is in line with the company’s expectations and he believes that, now, investors are more forthcoming, because they have understood the importance of the tax-saving instrument, which also yields annual and cumulative interest benefits at 9 per cent.
The person said L&T is expected to get close to 300,000 applications this time.

A banker, who is part of the issue, says these bonds are an added attraction because they provide an additional Rs 20,000 tax savings under Section 80CCF, which is over and above Rs 100,000 under Section 80C of the Income Tax Act.

The response to the issue has been decent compared with last year, and L&T would definitely see a comparable response to its issue compared with IDFC.

It’s that time of the year when employees have to submit their investment proofs to avail tax benefits and we have noticed that a lot of investors are coming for L&T bonds after the IDFC issue closed.

On Tuesday, IDFC announced that it has raised around Rs 538 crore from the first tranche of its long term infra bonds, which is 14 per cent higher than the first tranche of last year's bonds.

L&T bonds have buyback options after five and seven years and would be listed on the Bombay Stock Exchange after a five-year lock-in period.

L&T Infrastructure Finance launched the first tranche of its Rs 1,100 crore long-term infra bonds in two series with 9 per cent coupon rate on November 25.

Retail investors can subscribe to a minimum of five bonds and in multiples of one bond thereafter. Each bond would have a face value of Rs 1,000.

The bonds will have a maturity of 10 years and a lock-in period of five years, with a buy-back option after the fifth year and the seventh year from the date of issue, the company said.
These bonds are options given to infrastructure finance companies (IFCs) to support lending requirements and avoid dependence on banks. IFCs are not allowed to take deposits from retail investors. L&T was given the infrastructure finance company (IFC) status in July 2010. It can, thus, access long-term funds to meet growth plans.

To add to this, the limit of bank financing and external commercial borrowings has also increased.
The company has a diversified disbursement mix with the power sector accounting for almost 39 per cent of its advances. Apart from this, the company also provides financing to telecom, roads, oil and gas, ports and other infrastructure sectors, such as logistics and special economic zones (SEZs).

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Application form for Applying for Tax Saving Long Term Infrastructure Bond  

Current open Long Term Infra Bond Application form

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Invest in Tax Fre Infrastructure Bonds

Application form for Applying for Tax Saving Long Term Infrastructure Bond  

Current open Long Term Infra Bond Application form

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Apply for Infrastructure Bonds

Application form for Applying for Tax Saving Long Term Infrastructure Bond  

Current open Long Term Infra Bond Application form

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Long term Infra bonds are good to get extra tax break, but not beyond that…..

INVESTING in the equity markets is not an attractive option anymore for the average investor or even the biggest investors, who are failing to predict the way the market will move. Thankfully, there are a number of investment options that are available now, promising attractive returns for retail investors. There are two infrastructure bond issues that are open for investment at present, a non-convertible debenture (NCD) issue, which will be available for investment soon, and a number of interesting corporate fixed deposit schemes that one can choose from.

For an investor wanting to invest a sum of, say Rs 100,000 today, what would an investment in any of these instruments fetch in terms of returns. An analysis: Tax-saving infra bonds: The bond issues of L&T Infrastructure Finance are open now for investors and offers an interest rate of 9 per cent. Both bonds come with a 10-year tenure and a lock-in period of five years after which the bonds could be traded on the stock exchanges. But why should one go for an infra bond offering 9 per cent returns, when there are many banks that offer 10 per cent interest rate on fixed deposits?

These tax saving infrastructure bonds also help the investor claim a tax exemption of Rs 2,060-6,180, depending on the tax slab of the investor. 

Shortcomings: The tax benefit can be availed only for the first year of investment, despite the scheme having a minimum lock-in period of five years. Additionally, the tax benefit is available only up to an investment of Rs 20,000. Any investment above that would still fetch the same level of income tax For those in the 30 per cent tax bracket and have already exhausted the limit of Rs 100,000 under section 80C, it makes sense to invest Rs 20,000 in these bonds because it would result in savings of Rs 6,000.

Non-convertible debenture (NCD) issues

Many non-banking financial companies (NBFCs) like Muthoot Finance, Manappuram Finance and Shriram Transport Finance raised funds through NCD issues recently, offering attractive interest rates of 11.50-12 per cent. Muthooot Finance plans to soon hit the market with another round of NCD issue with an interest of more than 12 per cent and many NBFCs are also expected to follow.

Shortcomings: Though the returns are attractive, there is no tax benefit from investing in an NCD issue. Financial planners also advise investors to check the credentials of the companies and the ratings given by rating agencies for the issue, to ensure that the investment is safe.

Corporate fixed deposits
While banks offer interest rates of 9-10.50 per cent on fixed deposits, NBFCs and companies offer fixed deposit schemes with much higher interest rates. For in stance, Mahindra Finance promises an interest of 12.21 per cent (12.58 per cent for senior citizens) on fixed deposits with a five-year tenure.

Shortcomings: Fixed deposits, too, have no tax benefits. The investor should check the rating of the issue and study the past history of the company to ensure that the investment is safe, experts say.

Public Provident Fund (PPF)
After the maximum investment amount has been raised to Rs 100,000 and a higher post-tax returns of 8.6 per cent, PPF has become very attractive.

Being a government controlled instrument, it is absolutely secure.
The investments made in PPF are eligible for tax deduction under section 80C of an individual income tax return.

Shortcoming: PPFs have a minimum lock in period of 15 years. These are ideal instruments for a long-term investor.

Application form for Applying for Tax Saving Long Term Infrastructure Bond  

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L&T Infra Bonds closes for subscription on 24 December 2011

Application form for Applying for Tax Saving Long Term Infrastructure Bond  

L&T Long Term Infrastructure Bond Tranche 1

Investors looking for tax-saving options under Section 80CCF have one more option: L&T Infrastructure Bonds. Infrastructure bonds were introduced in 2010 to give a boost to the infrastructure segment as well as provide an opportunity for individual tax payers to reduce their tax liability. Investors can invest up to . 20,000 in such bonds and avail of tax benefits. The issue closes for subscription on December 24.
The face value of each bond is . 1,000. Investors can apply for a minimum of five bonds and in multiples of one bond thereafter. Investors can subscribe to these bonds in either the physical or demat form. There are two series on offer. In Series 1, the interest rate is 9% payable annually, while in Series 2, the interest rate is 9% but compounded annually payable at the end of maturity. The maturity is 10 years from the deemed date of allotment. The bonds will be locked in for five years from the date of allotment. The issuer offeres bondholders three exit options: buybacks after five years, or seven years, and 10 years which is at the time of redemption. In addition, once the lock-in period of five years is over, the bonds shall be listed on the BSE.
An investment of . 20,000 would fetch a tax exemption of . 2,060 (if your tax rate is 10.3%), . 4,120 (if your tax rate is 20.6%) and . 6,180 (if your tax rate is 30.9%) maximum.
L&T Infrastructure Finance Company, the issuer of the bonds, boasts of a good pedigree. It is reflected in the credit ratings of ‘CARE AA+’ by CARE and ‘[ICRA] AA+’ by ICRA, indicating high safety for timely servicing of debt obligations. Also, the tax benefit on . 20,000 per annum is in addition to the benefits available under sections 80C, 80CCC and 80CCD.
The bonds are locked in for five years. If you need funds in the interim period, you cannot even pledge or hypothecate these bonds, and there is no exit.

Application form for Applying for Tax Saving Long Term Infrastructure Bond  

L&T Long Term Infrastructure Bond Tranche 1

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About Tax Free Infrastructure Bonds Returns

Infrastructure bonds are offered by infrastructure finance companies, with prior approval of Govt. Of India. To promote the infrastructure growth , govt have offered investors tax benefit max upto Rs.20,000/-.
Capital raised under these issue is used in infrastructure development projects like projects of National Highways, power plant projects like thermal, hydroelectric power plants and other infrastructure projects.
This product offers investors saving as well as tax bachat.Its only product available in 80ccf section unlike crowded section 80C.

Investor in 30% tax bracket saves a tax of Rs.6000+Service tax + Ed sess = Rs.6,600/- .

If we consider an average rate of 8.30% per annum, calculation is as shown in the following table.

Capital Invested Rs.(A)	Tax Bracket	Tax Saved(ST + Cess) (B)	Effective amount invested(A-B)	Maturity value Rs.	Effective Interest rate Compounded pa
20,000	30%	6,600	13,400	29,800	17%
20,000	20%	4,400	15,600	29,800	13.8%
20,000	10%	2,200	17,800	29,800	10.80

Though interest earned is taxable, all the debt products whether bank deposits, company deposits, debt funds get the same tax treatment and income is taxable in each case.

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Download Section 80CCF Tax Saving IDFC Infrastructure Bonds Application Form

https://sites.google.com/site/infrabondapplications/home/IDFC-Infrastructure-Bond-Application-Forms

Download Section 80CCF Tax Saving L&T Infrastructure Bonds Application Form

https://sites.google.com/site/infrabondapplications/home/l-t-long-term-infrastructure-bond-for-year-2011---2012

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Infrastructure Bonds

Download Infrastructure Bond Application Forms

What is Tax Saving Infrastructure Bond? These bonds are options given to infrastructure finance companies (IFCs) to support their lending to avoid dependence on banks. IFCs are not supposed to take deposits from retail customers. The bonds would be issued in the dematerialised format and investors can even buy it in physical format if they don't have a PAN card or demat account. The bonds will be listed on the Bombay Stock Exchange (BSE) and investors can exit the bonds in the secondary market after the completion of the lock-in period. These Bonds are Tax Saving Infrastructure Bonds. By making investment of Rs 20,000 in Infrastructure Bonds, you can avail tax exception under Section 80CCF. Section 80CCF is in addition to Investment of Rs 1, 00, 000 that you can make under Section 80C and Rs 20,000 under Section 80D and Section 80E for Education loans of the Income Tax Act. You can Download Infrastructure Bonds application forms for: 1)      Infrastructure Development Finance Company (IDFC) 2)      Larsen & Toubro Infrastructure Finance Company Limited (L&T) 3)      IFCI 4)      Rural Electrification (REC) 5)      Power Finance Corporation (PFC) 6)      Life Insurance Corporation (LIC) 7)      IIFCL Documents Required: 1)      Filled Up Application 2)      Copy of the PAN card (Self-attested) 3)      A Cheque in favour of the 4)      KYC Documents: Self-attested copies of the following documents are required to be submitted by the Applicants as KYC Documents: a.       Proof of identification for individuals: Any of the following documents are accepted as proof for individuals: Ø      Passport Ø      Voter’s ID Ø      Driving Licence Ø      Government ID Card Ø      Defence ID Card Ø      Photo PAN Card Ø      Photo Ration Card. b.      Proof of residential address: Any of the following documents are accepted as proof of residential address: Ø      Passport Ø      Voter’s ID Ø      Driving Licence Ø      Ration Card Ø      Society Outgoing Bill Ø      Life Insurance Policy Ø      Electricity Bill Ø      Telephone Bill (Land/Mobile). Procedure: 1)      Print the application form, print and Fill it up 2)      Attach the required Documents 3)      Submit the form in a collection canter near you   Find a collection canter: Collection canter near you

Download Infrastructure Bond Application Forms

Infrastructure Bond Application Forms

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