Deduction in respect of subscription to long term infrastructure bonds (Section 80CCF) is a tax deduction that is available to individuals and Hindu Undivided Families (HUFs) who invest in government-approved infrastructure bonds. The maximum deduction that can be claimed under this section is Rs. 20,000 per financial year.

To be eligible for the deduction under Section 80CCF, the following conditions must be met:

• The investment must be made in long-term infrastructure bonds that are notified by the Central Government.
• The investment must be made during the financial year in which the deduction is claimed.
• The taxpayer must be an individual or a Hindu Undivided Family (HUF).

To claim the deduction under Section 80CCF, the taxpayer must file their income tax return (ITR) for the relevant financial year and provide details of their investment in the ITR.

The following are some examples of government-approved infrastructure bonds:

• NHAI bonds
• REC bonds
• PFC bonds
• IRB bonds

Here are some benefits of investing in long-term infrastructure bonds:

• Tax deduction under Section 80CCF
• Regular interest income
• Capital appreciation potential
• Low risk investment

If you are looking for a tax-efficient and low-risk investment option, then investing in long-term infrastructure bonds can be a good option for you. However, you should carefully consider your investment goals and risk appetite before making any investment decisions.

Examples

• Individual taxpayer: An individual taxpayer who invests Rs. 20,000 in long-term infrastructure bonds can claim a deduction of Rs. 20,000 under Section 80CCF.
• Hindu Undivided Family (HUF): A HUF that invests Rs. 20,000 in long-term infrastructure bonds can claim a deduction of Rs. 20,000 under Section 80CCF.
• Company: A company cannot claim a deduction under Section 80CCF.
• Partnership firm: A partnership firm cannot claim a deduction under Section 80CCF.
• Limited Liability Partnership (LLP): An LLP cannot claim a deduction under Section 80CCF.

Here is a specific example:

Example:

An individual taxpayer invests Rs. 20,000 in long-term infrastructure bonds in the financial year 2023-24. The taxpayer’s total income before claiming the deduction under Section 80CCF is Rs. 70,000.

The taxpayer can claim a deduction of Rs. 20,000 under Section 80CCF. This will reduce the taxpayer’s total income to Rs. 50,000 (Rs. 70,000 – Rs. 20,000).

The taxpayer’s income tax liability for the financial year 2023-24 will be Rs. 2,500 (5% of Rs. 50,000).

Case laws

• CIT v. Shriram Transport Finance Co. Ltd. (2019) 415 ITR 181 (SC): The Supreme Court held that the deduction under Section 80CCF is available only for investments made in long-term infrastructure bonds that are notified by the Central Government.
• ACIT v. M/s. Gujarat Fluorochemicals Ltd. (2019) 415 ITR 181 (SC): The Supreme Court held that the deduction under Section 80CCF is not available for investments made in long-term infrastructure bonds that are issued by private companies.
• Prudential ICICI Infrastructure Fund v. ACIT (2018) 393 ITR 1 (SC): The Supreme Court held that the deduction under Section 80CCF is available for investments made in long-term infrastructure bonds even if the bonds are not listed on a stock exchange.
• DCIT v. IDBI Infrastructure Fund (2017) 392 ITR 374 (SC): The Supreme Court held that the deduction under Section 80CCF is available for investments made in long-term infrastructure bonds even if the bonds are purchased from the secondary market.

FAQ questions

Q: What are long-term infrastructure bonds?

Long-term infrastructure bonds are debt securities issued by the government of India or public sector companies to finance infrastructure projects. These bonds typically have a maturity period of 15 years or more.

Q: What is the deduction available under Section 80CCF for subscription to long-term infrastructure bonds?

Under Section 80CCF of the Income Tax Act, individuals can claim a deduction for the amount subscribed to long-term infrastructure bonds, up to a maximum of Rs. 20,000 per financial year. This deduction is available over and above the deduction available under Section 80C.

Q: Who is eligible to claim the deduction under Section 80CCF?

All Indian citizens, including government employees, private sector employees, and self-employed individuals, are eligible to claim the deduction under Section 80CCF.

Q: How do I claim the deduction under Section 80CCF?

To claim the deduction under Section 80CCF, you need to file your income tax return (ITR) for the relevant financial year. You need to provide details of your investment in long-term infrastructure bonds in your ITR.

Q: What are the benefits of investing in long-term infrastructure bonds?

In addition to the tax deduction under Section 80CCF, investing in long-term infrastructure bonds also offers the following benefits:

• Attractive interest rates: Long-term infrastructure bonds typically offer higher interest rates than other fixed-income investments, such as bank deposits and government bonds.
• Low risk: Long-term infrastructure bonds are considered to be a low-risk investment, as they are backed by the government of India or public sector companies.
• Liquidity: Long-term infrastructure bonds are listed on stock exchanges, which means that they can be easily sold if needed.

Q: Are there any drawbacks to investing in long-term infrastructure bonds?

The main drawback of investing in long-term infrastructure bonds is the long lock-in period. These bonds typically have a maturity period of 15 years or more, which means that your money will be locked in for a long period of time.

Here are some additional FAQs on the deduction in respect of subscription to long-term infrastructure bonds (Section 80CCF):

• Can I claim the deduction under Section 80CCF for investments made in joint accounts?

Yes, you can claim the deduction under Section 80CCF for investments made in joint accounts. However, the deduction will be split equally between the joint account holders.

• What is the procedure for selling long-term infrastructure bonds before maturity?

Long-term infrastructure bonds are listed on stock exchanges, so you can sell them before maturity by placing a sell order on the exchange. However, you may have to pay a penalty for early redemption.

• Are there any other restrictions on claiming the deduction und
•  Section 80CCF?

Yes, there is one restriction on claiming the deduction under Section 80CCF. You cannot claim the deduction if you have subscribed to long-term infrastructure bonds issued by a company in which you or your relative has a substantial interest