Long-term Infrastructure Bonds

History of Infrastructure Bonds

These bonds were earlier offered by financial institutions such as UTI, ICICI and IDBI, and had a lock in period of 3 years. Infrastructure Bonds are not new to India. They have been used by the government in the precedent years, for infrastructure projects. Section 88 of the Income Tax Act offered tax deductions on investments of up to Rs. 30,000, in these infrastructure bonds. However, with the 2005-2006 union budgets, section 88 was scrapped.

This Section 80CCF is valid to Individuals and to Hindu Undivided Family (HUF) only. Deductions could be up to a maximum amount of Rs 20,000 from the taxable income, for any amount invested in long term infrastructure bonds from financial year 2010-11.

Section 80 CCF for Tax Payers-


Section 80C at present offers a maximum deduction of Rs 1 lakh, for investments in Life Insurance premiums, National Savings Certificate (NSC), Public Provident Fund (PPF) and Pension Plans.


The new section 80CCF, will offer a presumption of Rs 20,000, in addition to the deduction of Rs 1 lakh under sections 80C, provided the investments are in selected long term infrastructure bonds. The government has anticipated this section to uphold investments in infrastructure projects in India.


Key Benefits of 80 CCF and Infrastructure Bonds-

• These bonds could be pledged for taking loans from particular banks after the lock in period.

• Investments in infrastructure bonds would require PAN to be mandatory furnished.

• Section 80CCF applicable from start of April 2010 and would be issued in the financial year 2010-11.

• The long term infrastructure bonds will have term of 10 years.

• Minimum lock in period of 5 years.

• Deduction limit of Rs 20,000 in addition to the 1 lakh limit under sections 80C.

• Funds to be in long term infrastructure bonds as specified by the government.

• Exit from the infrastructure bond, after the lock in period, will be either through the secondary market or through buyback option, as specified by issuer.

Some long term Infrastructure Bonds are given below -


• Industrial Finance Corporation of India (IFCI),
• LIC Infrastructure Bond
• Infrastructure Development Finance Company (IDFC) and
• Non-Banking Finance Company (NBFCs) who are classified as an infrastructure finance company by the Reserve Bank of India (RBI)