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• IDFC and L&T Infra have dropped interest rates for tranche2 bonds to 8.7% as against 9% which they offered till December 2011. IFCI which offers 9.09% and 9.16% for 10 and 15 years consequently emerges as a good bet, but the subscription closes 16 January 2012.Those who missed IDFC or L&T Infrastructure Finance Company (L&T Infra) tranche1 last month will be disappointed to know that interest rates for tranche2 have marginally dropped from 9% to 8.7% for 10-year bonds; they open for subscription on 10th and 11th January, respectively. The good news is that IFCI bonds are still available in the market till 16 January 2012 and it offers 9.09% and 9.16% respectively for 10 and 15 years. These bonds can be invested for Rs20,000 towards tax savings under Section 80CCF, which is over and above the Rs1 lakh towards 80C.Several such bonds come in market during the tax saving season. Bonds of REC, IFCI, PTC India Financial Services and SREI Infrastructure Finance are currently open in the market. IFCI bonds have rating of A+ by Care and LA by ICRA. IFCI and REC have high safety as they are owned by the government.  L&T has AA+ rating from Care and ICRA. IDFC, which has a better rating, has AAA rating by ICRA and Fitch.

• Even though these bonds appear in a demat account, there are restrictions for selling it in the secondary market within the lock-in period of five years. Issuer of the bonds may offer buyback facility after five years.Tax savings bonds have struggled this year with IDFC mopping only Rs538 crore with target of Rs5,000 crores; L&T Infra got Rs630 crore with target of Rs1,100 crore. It may be due to competition from tax-free bonds recently issued by NHAI and PFC; these do not qualify for upfront tax savings, but the interest generated is tax-free as against the 80CCF infrastructure bonds whose interest is taxable.NHAI and PFC tax-free bonds were offered for 8.2%-8.3% per annum (p.a.) interest for 10 and 15-year bonds respectively. These will more than double your money in 10 years and the icing on the cake is tax-free interest. High net individuals (HNI) and institutional investors quota was over-subscribed as the genuine need for generated interest to be tax-free. PFC tax-free bond is open till 16th January.

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