The Government of India has provided certain scopes and incentives to its citizen for long term savings through tax exemptions under the income tax Act. If we look closely at this way of encouragement by the government, we will find that most of the funds that are invested by individuals or other entities go to different funds which have some relations with the development of the country. For example, funds of LIC premiums are invested in many development projects, infrastructure bonds are also ways of improvement and development, almost all the provisions under section 80 of the Income Tax Act includes investment and donations to certain funds serves dual benefits of development and welfare with long term savings.
Deduction Under Section 80C Of Income Tax Act
The section 80C offers some exemption benefits on investments to individual. The exemption limit extends up to Rs 1, 00,000 in an assessment year. If an individual invests up to Rs 1, 00,000 in a financial year in the instruments mentioned under 80C, such investment amount up to an amount of maximum Rs 1, 00,000 will be deducted from his taxable income.
The tax savings instruments as per section 80C are:
Market Linked Instruments: (i) Equity Linked Saving Scheme or ELSS (ii) Unit Linked Investment Plan or ULIP.
- ELSS is managed by AMC or Fund Managers.
- ELSS comes with a 3 year lock in period.
- Available in Systematic Investment Planning or SIP format.
- Diversified equity portfolio.
- Dividend paid is tax free.
ULIP funds are mostly invested in equities except some debt based funds. Although there are some inherent risks but in general they provide good return by beating inflation with appreciating values.
Section 80CCF Investment In Infrastructure Bonds
80CCF is a new section introduced by the CBDT. It provides exemption on income for investments in infrastructure bonds. If any individual or HUF invests in certain new Infrastructure Bonds an exemption of Rs 20,000 maximum, can be claimed U/Section 80CCF for such investment. This exemption is additional over the exemption of Rs1, 00,000 U/Section 80C, 80CCC, 80CCD. The bonds must be issued for a period of 10 years or more with a 5 year lock in period and the yield must not exceed the rate of government securities.
This section (80CCF) was introduced by the CBDT in the budget of 2010. However, the budget did not mention any names or exact criterions for infrastructure bonds to qualify the exemption under section 80CCF, but will be notified time to time by them. It was announced that both private sector or public or state owned company may qualify for 80CCF exemption. These bonds may come with a rate of interest for private and public company at a rate of (8 to 8.50) % & (7 to 7.50) % respectively.
The Demat Account may not be a must but submission of PAN and other details are must. For persons who have exhausted the exemption limit of Rs 1, 00,000 under section 80C, this section is ideal for them as it allows them to claim additional exemption on Rs 20,000.
- LIC Infrastructure bond.
- L & T Infrastructure bond.
- IDFC Infrastructure bond.
- Infrastructure bond PFC.
- PTC Financial Service.
- IFCI Infrastructure bond.
- IIFCL Infrastructure bond.
- REC Infrastructure bond.
- List Of Infrastructure Bonds Under Section 80CCF in 2011-12
- What Are The Tax Benefits Under Infrastructure Bonds in 2011?
- What is the Current Yield of Tax Free Bonds In India 2011?
- What is the Basic Difference Between Bonds and Debentures in India?
- Bank of Baroda Bonds in 2011: Rate of Interest and IPO