Applying for infra bonds

The market has been flooded with a spate of infrastructure bond offerings . Companies such as PFC, IFCI and more recently L&T Infrastructure Finance and IDFC are offering long-term bonds at attractive rates.

What makes these bonds eye-catching for investors is that these are tax saving instruments. By investing in these bonds, you can get a deduction of Rs 20,000 over and above the Rs 1 lakh that is generally allowed .

Given their benefits and attractive coupon rates of around 9 per cent , infrastructure bonds are sound investment options for the risk-averse. The minimum investment varies. For instance, in case of IDFC is Rs 10,000, while it is Rs 5,000 in the case of L&T Infra bonds.

But how does one go about applying for these bonds and what is the mode of interest payment?

Here we seek to answer these issues, so that you can have a hassle-free investment experience.

First of all, these bonds can be availed in both physical form as well as in the demat (dematerialised – electronic) format.

So, if you are not tech savvy or do not have a demat account, your best option is to opt for physical bonds.

In case you opt for the paper forms, , you should not fill the demat details in the application form.

But you will compulsorily have to give the following documents for the purpose.

REQUIRED DOCUMENTS

IDFC for example asks for self-attested copy of the PAN card, self-attested copy of a cancelled cheque of the bank account to which the amounts pertaining to payment of refunds, interest and redemption, as applicable, should be credited. A self-attested copy of the proof of residence is also required. Documents that can be shown as address proof include passport, driving license, ration card and electricity bill

The requirement is similar across other companies as well. Applying in the physical form is akin to holding a bank fixed-deposit certificate with a maturity date. On the other hand, if you are tech savvy and also have a demat account (and an e-trading account) then applying for these bonds is even easier.

Most of the details asked for would already be there with your demat and trading account vendor. Since your bank account is also linked, all you will have to do to apply for these bonds in the electronic format is to have sufficient funds in the linked account.

Also remember that for bonds issued in electronic format, there is no TDS on interest.

Since these bonds are listed on stock exchanges, mostly BSE and/or NSE, bonds held in demat format would allow you to trade these bonds as well. However, trading can be done only after the five-year lock-in period.

It is important to give the bank account details clearly as payment of interest will be through electronic(ECS) mode, as will the payment of principal.

For those not taking the demat route, the application form can be submitted at the branches of collecting banks whose addresses are mentioned on the application forms.

So here is your chance to save on taxes as well as participate in nation building. Happy investing!

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