Investments in the ICICI safety bonds may soon be eliglible for benefits under Section 80L of the Income Tax Act. In letter to ICICI, the Central Board of Direct Taxes has said it will examine the issue as soon as the allotment process is over. The Mumbai-based institution has been asked to submit the bond certificiates with their distinctive numbers after completion of the allotment process for CBDT's consideration. ICICI officials interpret this as an informal approval for their bonds.``The 80L benefit will be an added incentive for small investors who do not get an opportunity to take full advantage of the Section 80L benefit,'' said ICICI senior vice-president Madhabi Puri-Buch.
According to Section 80L, income from specified securities qualifies for deduction in the hands of individuals and HUDs subject to a maximum amount of Rs 12,000 in aggregate per year. ICICI officials say the 80L benefit makes the Tax-Saving Bond even more attractive. This is probably why investors seem to be lapping up the12.5 per cent, three-year tax-saving bond.
ICICI officials are also upbeat about collections. Although they refused to divulge the amount collected so far, they say the response is good. ``We are smiling,'' is how a senior ICICI official put it. ``For us the target is Rs 400 and we hope to meet that,'' adds another official. According to merchant bankers, RBI's decision to cut the repo rate by one per cent and the bank rate by 50 basis points has forced many people hitherto sitting on the fence (probably expecting interest rates to firm up soon) to take the plunge into the safety bonds.
Officials at ICICI say that many self-employed persons are queueing up for the safety bonds, particularly for the tax-free bonds, and are subscribing in large amounts of Rs 45,000-60,000.
Of the various bonds on offer, the response for the tax-saving bonds is better than the regular income bond which offers 14 per cent per annum payable annually. ``We are amazed that the 3-year option in the tax-saving bond has proved sopopular with the investors. We had earlier though that the RIBs would be the main attraction,'' noted Puri-Buch.
Denying reports that ICICI had been caught unawares by the RBI's decision to lower interest rates, ICICI officials say they were prepared for it. ``The amount we are raising though the safety bonds are for our March disbursements. We had anticipated the downward revision interest rates. But, we also know that with the financial year drawing to a close, banks will not revise their PLR downwards this month. To that effect, our margins will remain intact, `'added Puri-Buch.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
