High on the heels of PFC, IDFC, L&T and IFCI who recently opened the subscription for their respective long term infrastructure bonds, SREI has now joined the bandwagon to cash in on the tax saving rush and has launched its own issue of Infrastructure Bonds for tax savings as the financial year is going to come to a close in India in March 2012.
Let's start with some basics first for the SREI Infrastructure bonds issue:
What is the business of SREI which is offering these Tax Saving Infrastructure Bonds?
SREI is a leading company in infrastructure financing in India and has been in operations since last 22 years.
SREI Infra Bonds for Tax Saving
What are the products and services offered by SREI Power Finance Corporation ?The company offers
- Infrastructure Project Financing
- Advisory and Development
- Infrastructure Equipment Finance
- advisory and other services to power sector
- SREI also claims to be the first Indian infrastructure NBFC to be listed on the London Stock Exchange
How do the SREI Power Finance Corporation Tax Saving Infrastructure Bonds work?
If you are completely new to Tax Free Infrastructure Bonds, we strongly advise you to get the basic details about working of the infra bonds and the tax saving eligibility and calculations as mentioned in the article Tax Free Infrastructure Bonds Details: Save Tax On Investments in Infra Bonds. Once you are familiar with the basic calculations and tax saving details as per your individual tax slab, you can proceed with the details of this open issue of SREI Infra Bonds for Tax Savings 2011-2012
The basic working of these bonds from any issuing company or organization remains the same, whether it is IFCI, PFC, IDFC or L&T or SREI. Here are the examples of the calculations including tax benefits for investments in Infrastructure bonds :Calculations and Returns in Infrastructure Bonds Investments.
Now, once you are clear about the fundamental details, let's see the SREI Infra Bonds for Tax savings in more detail:
The issue size for the SREI infra bonds is Rs. 300 Crores, although the company was eligible for 500 crores of fund raising.
The bonds are being offered in 4 different options with 2 different maturity periods - 10 year and 15 years:
Series 1 & 2 - is for 10 year long bonds paying an interest rate of 8.90% per annum - coupon rate is higher than that offered by earlier issues of PFC issue but similar or lower to IFCI issue (see details below)
Series 3 & $ - is for 15 year long bonds paying an interest rate of 9.15% per annum - again, - coupon rate is higher than that offered by earlier issues of PFC issue but similar or lower to IFCI issue (see details below)
Exit option available after 5 years and 10 years period. Lock in period is 5 years.
The bonds will be listed on BSE or the Bombay Stock Exchange.
Each bond will have a face value of Rs. 1000.
Both these bonds come with the option of annual and cumulative dividend payment.
The bonds can be traded after the minimum lock in period of 5 years - the lock in period if for gaining the tax benefit.
Each SREI Infra Bond has a face value of 1000 Rs. Upper limit is not there i.e. one can apply for and buy any no. of bonds from SREI.
Allocation is on first come first serve basis.
However, as per the rule of tax-saving investments under section 80CCF of the IT Act, tax savings will be allowed only on a maximum of 20,000 Rs. irrespective of the amount of investments made in the SREI Infra Bonds.
How will the funds or capital raised by SREI infra bonds be used by the company?
The capital or funds raised by the company will be used for infrastructure lending.
What differentiates SREI Infra Bonds from the other issues like PFC IFCI, L&T & IDFC Infra Bonds which are currently open?
The main differences between SREI infra bonds and IFCI, IDFC & L&T infra bonds are the credit rating assigned, coupon rate offered and the price per bond. See details below:
1) IDFC Infrastructure Bonds for Tax Saving
2) L&T Infra Bonds for Tax Saving
3) IFCI Infra Bonds for Tax Saving
4) PFC Infra Bonds for Tax Saving
Other then the above, investors can also check the NHAI Bonds for Tax Savings
What is the security rating for the SREI Infra Bonds ?
The issue has 'AA' rating (indicating high degree of safety) from Care Ratings
How much will I effectively save by investing in SREI Infra Bonds ?
The calculations will be similar to what we covered for SREI Infra Bonds. Please see IDFC Infra Bonds for Tax Saving: Calculations, Review and Details
Also note that Wealth Tax is not levied on investment in Bond under section 2(ea) of the Wealth-tax Act, 1957.
The income by way of interest on these Bonds is fully exempt from Income Tax under Section 10(15)(iv)(h) of the Income Tax Act, 1961 and shall not form a part of the total income
What are the investment dates and period for SREI Infra Bonds ?
The SREI Infra Bonds subscription date was opened on December 31, 2011 and will close on January 31, 2012. This will give you enough time to plan your investments rather than waiting for last minute tax savings.
Srei Capital Markets, Karvy Investor Services, ICICI Securities & RR Investors Capital Services are the BRLM or Book running lead managers to the SREI Long term Infrastructure Bonds issue for tax savings
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