Can any tell me about the section 80CCF, its provisions, deduction provided and applicability......
If an individual avails this section 80CCF then Section 80C deduction will be given or not ????
karan challani
(article)
(82 Points)
Replied 12 October 2010
Good News for all individual tax payers !!! Even if you have exhausted limit of Rs. 1 lac under section 80C, you can still save tax. Government has given new avenue to save tax u/s 80CCF. You can avail this exemption by investing only in infrasture Bonds. Currently IDFC issue is on. The amount of bonds that can be issued u/s 80CCF is limited. It is advisable to act now.........The limit of 80CCF is Rs.20000/-
venkatraman shrinivas
(Tax consultant/Tax Advocate In Practice.)
(313 Points)
Replied 12 October 2010
Section 80CCF provides for a dweduction upto the extent of Rs.20,000 if any individual or HUF invests in any infraswtructrure Bonds to be notified by the government after 1.4.2011. This is to augment resources for specifically notified entities who are engaged in the process of infrastructure facilities, who are notified by the Central Government. The dweduction is over and above the limit of Rs.1 lKHY PROVIDED UNDER SECTION 80c, at present.
CMA. CS. Sanjay Gupta
("PROUD TO BE AN INDIAN")
(114220 Points)
Replied 12 October 2010
The Central Government have specified bonds to be issued by (i) Industrial Finance Corporation of India; (ii) Life Insurance Corporation of India; (iii) Infrastructure Development Finance Company Limited; and (iv) a Non-Banking Finance Company classified as an infrastructure finance company by the Reserve Bank of India; as “Long-term Infrastructure Bond” for the purpose of section 80CCF of the Income Tax Act, 1961.
Investment in these bonds up to rupees twenty thousand will be eligible for deduction from the total income of the assessee. The deduction will be in addition to the deduction of rupees one lakh allowed under sections 80C, 80CCC and 80CCD of the Act.
The tenure of the Bonds shall be a minimum of ten years with a lock-in period of five years for an investor. It will be mandatory for the subscriber to furnish permanent account number to the issuer for investment in the bonds.
Bhav Bhuti Sharma
(Towards Professionalism )
(823 Points)
Replied 13 October 2010
In the last Budget, a new provision for tax-saving investments, section 80CCF, was added to the Income-tax Act. This provision allows for a deduction of Rs20,000 for investments made in notified long-term infrastructure bonds. This deduction is separate and is in addition to the deduction available under section 80C for other investments such as life insurance premium, provident fund, Public Provident Fund, National Saving Certificates, etc.
Recently, the Union government notified the eligible issuers and the terms of such bonds. IFCI Ltd has now come out with the first such issue of infrastructure bonds. The bonds will give an interest, which is taxable, of 7.85%. Given the rate of return post-tax, is it worthwhile subscribing to these bonds?
What you need to keep in mind is that when you invest Rs20,000 in these bonds, assuming that you are in the highest tax slab of 30.9%, you will immediately save a tax of Rs6,180. Your net investment is therefore only Rs13,820. On this, the interest of Rs1,570 works out to a pre-tax yield of 11.36%, and a post-tax yield of 7.85%, which is fairly decent.
In fact, when one factors in the fact that the bonds would be redeemable at par, the rate of return is much higher on account of the tax benefit which one has obtained in the year of investment. You have a choice of opting for bonds with a buy-back option, where the lock-in period is five years and the rate of interest is 7.85%, or bonds without a buy-back option, where the bonds would be redeemed after 10 years but the rate of interest would be higher at 7.95%. Which option is more attractive?
Obviously, the bonds with the buy-back option is superior in terms of post-tax yield at 14.54% for investors in the top tax slab, opposed to the post-tax yield on the 10-year tenor bonds of only 10.67%, on account of the fact that the tax benefit is spread over a shorter period of five years instead of 10 years. For those in the 20% tax slab, the post-tax yields on the bonds over a five-year term works out to a lower 11.94% due to a lower tax benefit, while the post-tax yield for the 10-year bond works out to 9.61%—still an attractive proposition!
Besides buy-back, an investor may also choose to dispose off his bonds through a sale of the bonds. Such sale can also take place only after five years from the date of acquisition of the bonds. Of course, on a sale the capital gains (if any) would have to be computed without any cost indexation benefits since bonds are not eligible for such indexation.
Interestingly, the notification states that the bond shall also be allowed as pledge or lien or hypothecation for obtaining loans from scheduled commercial banks after the lock-in period. There is no specific prohibition on taking loans from other entities (such as non-banking financial companies, or NBFCs) against such bonds during the lock-in period of five years. Interestingly, unlike in the case of capital gains bonds, where there is a specific prohibition in section 54EC against taking loans against the bonds within three years and a provision that in case a loan is taken against such bonds within that period, the exemption granted will be withdrawn in the year in which the loan is taken, there is no such prohibition or consequence provided in section 80CCF.
Life Insurance Corp. of India (LIC), Infrastructure Development Finance Co. Ltd and NBFCs classified as infrastructure finance companies would also be allowed to issue such bonds. The government has notified that the interest rate on infrastructure bond issues should not exceed the 10-year yield on government securities prevailing at the month-end preceding the issue date. The interest rate on future issuances of infrastructure bonds may therefore vary depending upon the prevalent yields of 10-year government securities. Considering the fact that the investment would be of only Rs.20,000, the changes in interest rates for other infrastructure bond issues may not have a significant effect on the income.
From reports, one gathers that LIC is also contemplating providing free insurance cover to bondholders who subscribe to its infrastructure bonds. While that would be an added benefit to an investor, there would be no additional tax benefit in respect of such cover, as no premium would be actually paid by the investor.
All in all, infrastructure bonds seem to be an attractive investment for taxpayers in the 30% and 20% tax slabs. One only wishes that the permitted investment limit were higher!
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
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