IDFC has come up with infrastructre bond issues. The bonds are rated AAA by leading rating agencies, regarded as the safest rating and the probability of default is very less.
The features of the current scheme is shown in the below table
Source: IDFC
The features of the current scheme is shown in the below table
| Series | 1 | 2 | |
| Face Value |  5,000 per Bond | ||
Minimum number of bonds per application | Two bonds and in multiples of one bond thereafter. For the purpose of fulfilling the requirement of minimum subscription of two bonds, an applicant may choose to apply for two bonds of the same or different series. | ||
| Interest payment | Annual | Cumulative | |
| Interest Rate | 9% p.a. | N.A. | |
| Maturity Amount per Bond | 5,000 | 11,840 | |
| Maturity | 10 years from the deemed date of allotment | ||
| Yield on Maturity | 9% | 9% compounded annually | |
| Buyback Facility | Yes | ||
| Yield on Buyback | 9% | 9% compounded annually | |
| Buyback Date | Date following 5 years and one day from the deemed date of allotment | ||
| Buyback Amount | 5,000 per bond | 7,695 per bond | |
| Buyback Intimation Period | The period beginning not before nine months prior to the buyback date and ending not later than six months prior to the buyback date | ||
These bonds are applicable for tax deduction under section 80CCF. The maximum amount for which you can take deduction is Rs 20,000/-
Please note that the interest that you would receive will be taxable at the investor's personal tax rate.
The investment can be done in physical format or demat format.
There will be no TDS in demat format. TDS will be applicable (subject to the guideline) for phyiscal format bonds.
Owing to high rating, we recommend investors to invest in the bonds.
We recommend the investors to invest in the option 1 and also to opt for the buy back option, where in the investors have the option to sell the bond to IDFC at the end of 5 years.
Why not option 2?
In option 2, you are not getting interest annually, the interest would be given to you at the end of the buyback or maturity date as applicable, but as per the current tax laws, an investor is required to pay tax on the interest earned on these bonds (even when you dont get the interest!!), so it is advisable to opt for Option 1.
There would be lots of infrastructure bonds which will be issued by many eligible players, but we recommend investment in these bonds for the following reasons
- Highest safety
- High rate of interest - 9% is good rate, since the interest rate on these bonds are determined by the current 10 yr GOI bond, it is a good rate. We believe that interest rate is nearly at its peak, so there might be some issue with higher rate (may be 0.1% - 0.3%) available to the investors in the future, but since the difference is not much, it would be good to invest in this issue
- Higher liquidity in IDFC bonds are expected becasue of larger issue size (as compared to other infrastructure bond issues). More retail investors are expected to go in for IDFC issues. So in future (after the 5 years lock in) if you want to sell your bonds in the market, you would be able to do it more favorably as compared to other bonds.
- Buy back option available for both the options at the end of 5 years
So, please make sure that you are a part of it.
Disclaimer: Bonds and equities are not risk free investment, there is risk of loss to the capital when you invest in such securities. This article should not be taken as recommendation, please consult your financial advisor/financial planner before doing any investment. Any loss suffered by an individual (non client) owing to the investment in such securities is because of their own decision and Moneyplant Financials doesn't take responsibility for it.
