Infrastructure bonds- Worth to invest in?

About Infrastructure bonds

Infrastructure Bonds InvestmentIn last year’s budget 2019, a deduction was allowed for investing up to Rs 20,000 in bonds known as Infrastructure Bonds.  According to some financial experts and financial media articles, it is a very positive thing.

But one should figure out in advance whether this investment alternative is a healthy one or not.

Infrastructure Bonds are the government bonds that are available in the debt market. This bond is invested for the long term and carries high security. It is a debt instrument that provides high periodic interest that does not change often.

The pros and cons of Infrastructure Bonds can be analyzed from the perspective of different tax groups.

Group 1: Taxable income of Rs 1.6 lakh to Rs 5 lakh.

Group 2:  Taxable income of Rs 5 lakh to Rs 8 lakh.

Group 3: Taxable income above Rs 8 lakh.

Four parameters should be considered before investing in these bonds:

  • Tax Saving.
  • Lock-in Period for Invested Bonds.
  • Returns from the investment.
  • To earn the lost opportunity.

Tax Saving:

Tax saving will be different for different tax groups as shown below:

For 10 %: You can save Rs 2,000.

For 20 %: You can save Rs 4,000.

For 30 %: You can save Rs 6000.

Lock-in Period:

Generally, these periods come up for a lock in a period of 5 years.

Returns from investment:

You can fetch almost 7-9 % of the return from these bonds.

Conclusively, if you are the highest taxpayer, it is defiantly a worthy decision to invest in these bonds.  If you are in the lowest taxpaying bracket, then you should not go for these bonds. If a person lies in the medium tax bracket, you should go for these bonds for a lock in a period of 2-3 years.

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