Invest in Infrastructure Bonds to Increase Exemption Limit of Rs 100,000 to Rs 120,000

Salaried people can avail extra Income Tax exemption of maximum Rs 6,000 (30% of Rs 20,000) by investing Rs 20,000 in Infrastructure Bonds. This exemption is available on Income earned after 1st April 2010. Also this exemption is over and above the investment limit of Rs 100,000 per annum.

Government has given this incentive to increase investment in Infrastructure  sector. Make sure you buy the bonds which are notified by Central Government for Income Tax Exemption purposes.

The Bonds to be issued by :-

1. Industrial Finance Corporation of India (IFCI)
2. Life Insurance Corporation of India (LIC)
3. Infrastructure Development Finance Company Limited
4. Non Banking Finance Company (NBFC) CLASSIFIED AS INFRASTRUCTURE FINANCE COMPANY by Reserve Bank of India

The Lock in period for the investment would be five years however investor has an option to stay invested till ten years.

Interest rates ranges normally between 7 to 8 percent per annum which is also tax free.

Central Government has given this specific incentive to reduce your tax burden marginally in the year of investment by giving you Tax Exemption from your regular income and Tax Free Interest at the time of redemption of bonds after five years.

This option is undoubtedly better than keeping money in Fixed Deposit, so go ahead and buy these bonds before 31st March 2011 to avail tax exemption from your Income for 2010-11 Financial Year.