Have you ever wondered where does the government get so much money from? It comes from the people, i.e. us! People like you and me fund developmental projects, which often go by the name of infrastructure projects. Wondering why would you fund such a project? The government is always in need of some money, and they offer interest on this debt free investment. It is a good way to make some money, at the same time feeling the moral good of helping the nation.
Infrastructure bonds are usually issued by a non-banking financial firm. These firms act as an agent between the government and the investors. All your financial dealings take place through these financial firms who deliver your money to the banks. And infra bonds are usually considered as one of the safest investments, unlike others. That’s why infrastructure bonds in india are one of the most preferable investments. You can trust the government to give you interest bi-annually, and return your principal sum at the end of the maturation period.
Infrastructure bonds are tax deductible. Apart from the Rs. 100,000 deductible on investments under section 80C, an investment of up to Rs. 20,000 is tax deductible under section 80CCF. You can apply for these bonds if you are above the legal age for voting in the country, and these bonds can be carried in physical form, or can be deposited in your Demat account. Even Hindu Undivided Families can purchase this bond. But these bonds are issued on the basis of PAN cards, so multiple entries under the same name should be avoided.
Infra bonds are ideal for those looking for long term investments, since you need to lock in your money for at least 10 years. So if you are a regular investor, this investment might seem a good option. Interest received on infra bonds varies from 8% to 8.5% per annum, and is paid to you twice a year. Infra bonds, though attractive, shouldn’t be your only place of investment. Try to diversify your investments by investing in fixed deposits, mutual funds, affordable health insurance plans, stocks and shares, commodities, life insurance schemes, and savings schemes.