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Saturday, July 20, 2013

IRFC Tax Free Bond : Ultimate Solution For NRI

 Salient Features 
Ø   The Income by way of interest on these Bonds is fully exempted from Income Tax and shall not form part of Total Income as per provision under section 10 (15) (iv) (h) of I.T. Act, 1961.
Ø   Wealth Tax is not levied on investment in Bond under section 2(ea) of the Wealth -tax Act, 1957
Ø    Tax Free bonds are issued by Government Owned Undertakings and carry high credit rating
Ø    Bonds to be allotted on first-cum-first serve basis up to the issue size of relevant tranches
Ø     Bonds are likely to be issued either in Demat form or physical form at the option of bondholders.
Ø    Bonds are listed on the WDN segment of the BSE and the NSE. and so, they will be traded, and this will provide liquidity to the instrument in a transparent manner.
Ø     No Limit on Investment
Ø     IRFC Tax Free Bonds are a lucrative option for investors in the 30% tax bracket. The return generated by the bonds are much higher than bank deposit. No banks are offering 11% interest rate neither for  short or for such a long period.
Ø  NRI’s can invest in bonds through Repatriable as well as Non - Repatriable basis.
IRFC – Tax Free Bonds have 10 or 15 Yrs Maturity and offer an average 8.00 to 8.10 % of interest ( 8.15 to 8.30% of Interest – With Some Condition ). Pre tax yield on these bonds are close to 11 per cent. The coupon is attractive given the fact that it is tax free returns and compares favorably than other current avenues, like bank or corporate deposits.

Analysis & Calculation For IRFC Bonds 2012
( 1 ). What is the face value of each bond? Minimum Investment Size?
Rs. 1,000/- per Bond. ; Minimum 10 Bonds ; Minimum Investment Size-Rs.10000( thereafter in multiples of 5 bonds)
( 2 ). Who is NRI ?
A Non-Resident Indian is a citizen of India ( holding a valid passport of Government of India ) temporarily residing in the country of his / her present residence.
NRI includes Person of Indian Origin ( PIO ).


A PIO is a citizen of any country other than Pakistan or Bangladesh if :
( a ). He / she at any time held an Indian passport
( b ). He / she or either of his/her parents or any of his/her grandparents was a citizen of India
( c ). The person is a spouse of an Indian citizen or a person referred in A and B above.
( 3 ). What Type Of Accounts For NRI – Currently In India ?

( 4 ). If I ’m an NRI can I invest in these bonds ?
          
Yes. NRI’s can invest in bonds through Repatriable as well as Non - Repatriable basis.
( 1 ). In case of NRIs applying under repatriation basis: If it is received either by inward remittance of freely convertible foreign exchange through normal  banking channels i.e. through rupee denominated demand drafts/cheque drawn on a bank in India or by transfer of funds held in the investor’s rupee denominated accounts i.e. Non-resident External (NRE) account maintained with an RBI authorised dealer or a RBI authorised bank in India.
( 2 ). In case of NRIs applying under non - repatriation basis - If it is received either by inward remittance of freely convertible foreign exchange through normal banking channels i.e. through rupee denominated demand drafts/cheque drawn on a bank in India or by transfer of funds held in the investor’s rupee denominated accounts i.e.. Non-resident Ordinary (NRO) account and Non Resident Ordinary (NRO) maintained with an RBI authorised dealer or a RBI authorised bank in India.
( 5 ). Can person who has foreign citizenship and having PIO card apply in IRFC Issue?
Yes , Submit self attested copy of PIO Card along with application
( 6 ). Can a NRI apply for bonds in Physical mode?
Yes. NRI can apply for physical mode.
                      
( 7 ). There is a separate form for NRI?
There is no separate form for NRIs, the form for residents and NRIs are same.
( 8 ). Documents required along with NRI application in case of Demat mode?
( I ).    Application form in original
( II ).   Cheque from respective bank account – NRE / NRO
( III ). Self attested copy of PIO card ( If client is a PIO ) Or Notarized copy of POA if application under POA.
( IV ).  Pan Card Copy of POA self certified.
( 9 ).   Documents required incase NRI applying in Physical mode?
Application in Original ( Please complete the Application Form in all respects, by providing all the information including PAN and demographic details )
Cheque from respective NRE / NRO saving as applicable.
Self-attested copy of the Income Tax Pan card
self attested copy of PIO card ( if client is a PIO )
Self-attested copy of the proof of residence.
Self-attested copy of a cancelled cheque leaf
Self attested bank statement ( if the given chq does not display the client Name and account status-NRE/NRO)
Notarized copy of POA if applicable.
Copy Of Power Of Attorney  ( Self Certified )
Important note: Applications by NRI in physical form shall be submitted only at the Collection Centres located at Mumbai, Delhi, Ahemdabad, Hyderabad, Chennai, Bangalore, Chandigarh and Kochi.
( 10 ). Can one apply in joint names?
Yes,
Applications may be made in single or joint names (not exceeding three). In the case of joint Applications, all refunds/ interests/ redemption amounts will be made out in favour of the first Applicant. All communications will be addressed to the first named Applicant whose name appears in the Application Form at the address mentioned therein.
Names in the Application Form should be identical to those appearing in the account details in the Depositories. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details in the Depositories.
( 11 ). Can NRI apply by doing the direct transfer of funds to escrow account?
No, not allowed
NOTE:
Only cheque from respective NRE / NRO account maintained with an RBI authorised dealer or a RBI authorized bank in India will be acceptable. Demand draft along with banker certification is acceptable
( 12 ). Can cheque be signed by a person holding POA?
Cheque may be signed by the POA holder as long as the applicant`s bank clears the Cheque
Documentary requirement in case of application made under power of attorney Notarized copy of POA must be attached with the original application and cheque.
( 13 ). Who will get the interest in case of joint application?
In case of joint application, interest will be accounted to the first holder only, and will be credited to the bank account which is linked to demat account.
( 14 ). Is there TDS on the interest on allotment of bonds?
There will be no deduction of tax at source from the interest on allotment of bonds
( 15 ). Are these bonds listed any where?
Yes. The Bonds will be listed on NSE and BSE
( 16 ). Will the scanned copy of form be acceptable?
No.Scanned copy of form will not be acceptable.
( 17 ). Does this bond carry buyback options?
No. Neither “Put Option” shall be available to the Bondholder(s), nor would “Call option” be available to the Company to redeem the Bonds prior to maturity.


Tomorrow I am going to post Some Calculation Sheets here..

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