Boost your tax savings! Why infrastructure bonds are a game-changer
What's the story
Infrastructure bonds are a unique investment opportunity that allows you to contribute to nation-building while enjoying tax-saving benefits as an Indian taxpayer. These bonds, issued by government entities or corporations, raise funds for critical infrastructure projects (think highways, power plants, and airports). So, it's a win-win situation. You play a part in the country's development and save taxes at the same time.
Tax saving
Tax benefits explained
A key reason why people invest in infrastructure bonds is to avail of the tax benefits under Section 80C of the Income Tax Act. By investing in these bonds, you can claim a deduction of up to ₹1,50,000 from your total income. This effectively lowers your taxable income, and hence the tax you need to pay.
Long term
Long-term investment horizon
Infrastructure bonds typically come with a long maturity period of 10 to 15 years. This long-term commitment gives your money ample time to work its magic, compounding and growing over the years. It's a great choice for investors who want steady returns over the long haul without the stress of short-term market ups and downs.
Interest rates
Interest rate advantage
The returns (or interest rates) on infrastructure bonds are typically higher compared to conventional fixed deposits in banks. Hence, they are a good option for investors looking for higher returns with a lower risk compared to equity investments. While the interest you earn is taxable, the overall benefit you get considering the tax savings is usually more significant.
Nation building
Contribution to nation building
By investing in infrastructure bonds, you are directly participating in nation-building and contributing to the enhancement of India's backbone i.e. infrastructure. This investment not only contributes to economic development but also creates jobs, improving the lives of many Indians. It is a way of socially responsible investing, where your money contributes to the nation's progress while also generating returns for you.
Liquidity
Liquidity considerations
Infrastructure bonds, due to their lock-in period, do not offer the same liquidity as other investments like stocks or mutual funds. However, some issues may offer buyback facilities or be listed on stock exchanges for trading. This provides a potential liquidity route for investors requiring access to funds prior to maturity, although it is subject to market conditions at the time.