Exhausted 80 C investment limit? 80 CCF bonds are the solution

Mr. Singh was worried as he exhausted his 80 c limit of Rs. 1,00,000, and wanted to save more tax.

He always expected Finance minister to raise the 80 C limit. Though 80 C limit was not raised but another avenue to save tax was provided-80 CCF .

Under 80 CCF, an individual or HUF can pay up to Rs. 20,000 in infrastructure bonds over and above RS. 1,00,000 investment under 80C.

Infrastructure bonds are issued by infrastructure companies and capital raised  from these bonds is invested in infrastructure development projects like highway development, power plants etc.

The maturity of such bonds is 10 years or more but many issuer companies gives the exit options after the completion of 5 years. Infrastructure bonds are listed on at least one stock exchange and investor can sell bonds after the completion of the stipulated period.

This means Mr. Singh by investing in 80 CCF bonds could now save tax on the amount of Rs. 1,20,000 (Rs. 1,00,000 under 80C plus Rs. 20,000 under 80CCF).

No TDS shall be deducted on the interest but Interest payable on such bonds is taxable in the hands of the investors. One can invest amount in excess of Rs. 20,000 but tax benefits shall be provided for RS. 20,000only.

Mr. Singh was now happy as he can now save tax little-above Rs. 6000.

Latest update: 80 CCF benefits may not be available in FY 13. Waiting for the fiance bill for details.