Life Insurance Corporation of India (LIC of India) is about to launch its much awaited Infra bonds. LIC is allowed to issue infra bonds worth 25% of its last years investment. LIC is expected to generate Rs.5000 crores from the infrastructure bonds. Earlier LIC has given hint that they will be launching infra bonds by end of 2010 but it seems they wont be able to launch it until January 2011. According to sources LIC is waiting on IRDA for clarification of guidelines since LIC is a Life Insurance company and not infrastructure company.
LIC’s infra bonds will give tax benefits to investors up to Rs 20,000 under section 80CCF. This limit is over and above Rs 1 lakh limit under different sections of Income Tax Act. This tax benefit is available with any infrastructure bond from any other company as well.
Generally, any LIC policy is backed by government but infra bonds may or may not be backed by government since the amount is huge. This will be clear when the IRDA gives the green signal to LIC and LIC announce the infra bonds.
Hopefully, LIC will launch the bonds as a new year gift to all investors who want to save and invest as the same time.