Five-year lock-in for infrastructure bonds

The Centre has cleared infrastructure bonds issued by certain
government and Reserve Bank of India (RBI)-approved entities.

They will be eligible for tax deduction under Section 80CCF up to a
maximum Rs 20,000.

The bonds will be issued by Life Insurance Corporation of India,
Industrial Finance Corporation of India, Infrastructure Development
Finance Company and non-banking finance companies classified as
infrastructure finance companies by the RBI.

This includes L&T Infrastructure Finance, which got RBI approval
earlier this week.

The proposal of creating funds to meet the long-term needs of
infrastructure development was mooted in the Budget 2011.
Finance minister Pranab Mukherjee had said in his budget speech last
February that, “To promote savings as well as to ensure their
utilisation for the thrust area of infrastructure, I propose to allow a
deduction of an additional amount of Rs 20,000 for investment in long-
term infrastructure bonds... This would be over and above the existing
limit of Rs.1 lakh on tax savings.”

The government aims to spend $500 billion on infrastructure in the five
years to end-March 2012, and is considering doubling that figure in the
five years after that.