Key Features :
New Section Introduced in Income Tax Act 2011: Section 80CCF was introduced in the Income Tax
Act, 1961 in the budget of February 2010. As per this section investments made in notified
infrastructure bonds are exempt from tax up to maximum of Rs 20,000 per year. Section 80CCF
allows individuals to invest Rs. 20,000 in infrastructure bonds, and reduce this amount from
taxable income. This exemption is in addition to the Rs. 100,000 deduction under section 80C
(Investment in instruments like ELSS Mutual Funds, Life Insurance, Provident Fund etc).
Interest Income is Taxable: The interest income from infrastructure bond is
taxable. The interest will be added to investors taxable income. This means even though the
investment in these bonds is exempt from tax (maximum Rs 20,000). interest income is not. This
means investment under section 80CCF is advisable only after the investor has completely
exhausted Rs One Lakh investment under section 80C.
The funds raised through these bonds will be utilised towards "infrastructure lending" as
defined by the RBI in the regulations issued by it from time to time, after meeting the
expenditures of, and related to the issue. These infrastructure bond issues are part of the
government's effort to mobilise money to part-fund the massive $1-trillion infrastructure spend
it has planned for the Twelfth Plan.
Tax Benefits: Under section 80CCF of the Income Tax Act, Rs 20,000 per annum
paid or deposited as subscription to long term infrastructure bonds shall be deducted in
computing the taxable income. This is over and above Rs 1,00,000 tax benefit available under
section 80C, 80CCC and 80CCD.
Pros: The limit of Rs 20,000 per annum is in addition to Sections 80C, 80CCC
and 80CCD. Hence, it is advisable to consider applying in this issue. Cons: The bonds are locked
in for five years, so there is no exit in case you need the money midway which restricts
liquidity.