In the Union Budget 2010, the Government provided an additional income tax benefit of 20,000 under section 80CCF of the Income Tax Act, 1961 for investments made in long-term infrastructure bonds (as notified by the Central Government). This move was intended to provide a fillip to infrastructure finance and provide an opportunity to individual tax payers to reduce their tax liability.

 

In light of the same PTC India Financial Services (PFS) Ltd ("the issuer"), at present is offering these "long-term infrastructure bonds". PFS is promoted by PTC India Ltd (PTC) as a special purpose investment vehicle to provide total financial services to the companies in the energy value chain. However, before we assess whether it is really worthwhile investing in these bonds, let's understand the key highlights:

 

• What are these bonds named as?
  
  These bonds are specifically named as "Long-term Infrastructure Bond".
   
• Who would be the issuers of these bonds?
  
  The bonds will be issued by the following entities:
   
  1. Industrial Finance Corporation of India Ltd.
  2. Life Insurance Corporation of India
  3. Infrastructure Development Finance Company Limited
  4. A Non-Banking Finance Company (NBFC) classified as an Infrastructure Finance Company by the Reserve Bank of India (RBI)
  
   
• When will these bonds be issued?
  
  These bonds will be issued in the financial year 2010-11 and the volume of issuance will be restricted to 25% of the incremental infrastructure investments made by the issuer during the financial year 2009-10.
   
• What is the minimum tenure of these bonds?
  
  These bonds will carry a minimum tenure of 10 years.
   
• Is there a lock-in period while investing?
  
  Yes, an investor is subject to a minimum lock-in period of 5 years while investing in these bonds.
   
• How does one exit after the lock-in period?
  
  After the lock-in period, the investor may exit either through the secondary market or through a buyback facility, as specified by the issuer in the offer document at the time of issue.
   
• What will be the yield on the bond?
  
  The yield on the bond will not exceed the yield on Government securities of corresponding residual maturity (10 year G-Sec for this bond), as reported by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), as on the last working day of the month immediately preceding the month of the issue of the bond.
   
• How would be the proceeds from these bonds used?
  
  The proceeds from these bonds will be utilised for the purpose of infrastructure lending as defined by RBI (as per the guidelines issued by it).
   
• Is interest earned on these bonds taxable?
  
  The interest received in these bonds is not tax free. The investor is liable to pay tax on the interest received.
  The interest received on these bonds shall be treated as income from other sources and shall form part of the total income of the assessee in that financial year in which it is received. However no TDS shall be deducted on the interest received as these bonds if issued in Demat mode and listed stock exchange.
   

  The details on the "long-term infrastructure bonds" offered by the issuer PFS Ltd. are as under:

  

  Note: PAN card is mandatory for subscribing to these bonds. A self attested copy shall be enclosed along with the application form.

   

  Investors’ will also have the following options available at the time of subscribing to the issue:

   

  * Assuming that the income tax slab of the investor remains the same across the bond tenure
  (Source: Application form of IIFCL & PFN Research)

   

  Well, after reading the details of the scheme, there may be still some more questions popping up, which are attempted to answer herein:

• Can one invest in all the four options?
  
  Yes, one may invest in all the four options, subject to a minimum application amount of 5,000 under each option.
   
• Can one apply in joint names?
  
  Yes, one may apply in a joint name (with a maximum of three applicants). However, the demat accounts will also be required to be held in joint name and the order of applicant shall be the same as appearing in the demat account. Moreover, the tax benefit can be availed only by the first applicant.
   
• Who will get the interest in case of joint application?
  
  In case of joint application, interest will be paid to the account of the first holder only.
   
• My demat account is in joint name, but I want to apply is a single name?
  
  In case of a single application, demat account of the same single applicant would be necessary. Joint demat account would not do.
   
• Can one pledge or lien or hypothecate the bond, while obtaining a loan from a scheduled commercial bank?
  
  Yes, one may pledge or lien or hypothecate the bond, while obtaining a loan from a scheduled commercial bank. However, this can be done once the said lock-in period is over.

 

TAXATION OF LONG-TERM INFRASTRUCTURE BONDS:

Your investment in these "long-term infrastructure bonds" will be eligible for a deduction under section 80CCF of the Income Tax Act, 1961 subject to a maximum limit of Rs  20,000. This deduction limit of Rs  20,000 will be over and above Rs 1,00,000 benefit available under section 80C, 80CCC and 80CCD.

 

However, the interest earned by you on the investments (in these bonds), will be taxed (they would be included in the "Income from Other Sources", in the financial year in which it is received). However, since these bonds are compulsorily issued in a demat mode and listed on the exchange, no Tax Deduction at Source (TDS) will be done on the interest received.

 

OUR VIEW:

In our opinion investments in PFS's long-term infrastructure bonds, are a risky bet as they score low on ratings provided by Brickwork and ICRA, though they relatively provide higher returns than their category peers.

 

Instead investors should settle with a little less yield and invest upto a maximum of Rs  20,000 (as anything above the Rs 20,000 limit under section 80CCF will not attract tax exemption) in a better rated long term infrastructure bonds floating in the market at present. Also, make sure to select the right option in order to benefit from the high yields on these bonds.

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sunita.kumari@hotmail.com Jun 26, 2018 Subject: Re: 4 bonds vide Regd.Folio No.PTB0102660 and a certificatePFS LONG TERM INFRASTRUCTURE BONDS SERIES 11 Subject: Submission of PFS certificate against amount paid 20,000 vide Cheque No: 002864 Dated 29 Feb, 2012. State Bank of India, Kajheri, UT Cha Subject: PFS LONG TERM INFRASTRUCTURE BONDS SERIES 14 bonds vide Regd.Folio No.PTB01026601 Sent in your office as demandd by you of PFS Folio No.PTB0102660 certificate against amount paid 20,000 vide Cheque No: 002864 Dated 29 Feb, 2012. State Bank of India, Kajheri, UT Chandigarh. Name: Sunita Kumari Sharma Address 3348/2 Sector 45 D, Chandigarh 160047 form No/RECEIPT NUMBER. 4038469 ISSUED ON dt 29 feb 2012. pan no: AEYPS 7715Q I have sent all original bonds as demanded by you by Feb or march 2018. If they have become to pay Only then please deposit amount direct in my State Bank of India SCO 125-126 Sector 17C Chandigarh Account 55140294886 IFSC Cide SBIN0050167. Branch Code : 050167 as this information already submitted with original bonds sent Feb 2018 for payment please ___________________________ UNDER BYE BACK : I SENT BOND TO COMPANY BUT TILL DATE DID NOT RECEIVED AMOUNT Thanks. with Regards Sunita Kumari Sharma ph 001 778-982-3348 landline 604-503-4313
dptewari123@gmail.com Mar 13, 2019 I WANT TO BUY INFRASTRUCTURE BOND TO GET TAX EXEMPTION U/S 80CCF FOR THE F. A 2018-19 A. ?. 2019-20 IS THESE BONDS ARE OPEN TO BUY AT MARKET TO-DAY AND ONWARD, IF YES RHEN WHOSE CO.
shyamkumar_lakhani@rediffmail.com May 19, 2011 when these long term Infra bonds are going to start.Which is the last day ?

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