Fintotal News Analysis | 80 CCF Deduction Not Extended for 2012-13
80 CCF Deduction Not Extended for 2012-13
Ruby Jacob, 04 Apr 2012

When Pranab Mukherjee failed to mention about tax exemption on Infrastructure Bonds we feared the rebate would not be extended this year. The Finance Ministry has confirmed that the Rs 20,000 deduction on income tax for investing in infrastructure bonds has been scrapped for 2012-13. This deduction under section 80 CCF of the Income Tax Act was introduced in 2010 to channelize savings to infrastructure development of the country. It has to be extended every year for making deduction valid under the section for the year.

Ironically the finance minister in his budget speech proposed to increase funds raised by infrastructure lenders in 2012-13. Interest rate on infrastructure bond issues in 2011 was in the range of 8.8-9.16%. Perhaps the government perceives that giving tax exemption on these bonds yielding such high returns is a very costly way of raising funds for infrastructure.

Removing of 80 CCF rebate is a big blow especially to tax payers in the highest income bracket but how many of them actually utilized the rebate is a question. If you were planning to save on tax via investment in infrastructure bonds, don't spend too much time fussing over this news. Instead focus on alternatives and the less common rebates such as tax-free infrastructure bonds. Investing in these will not lower your taxable income however the interest earned from the bonds will be entirely tax-free. Take a quick run through the ready reckoner to know what other ways you can take to save on tax.

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