Infrastructure bonds are generally defined as debt securities issued by Indian infrastructure projects and companies that are used to not only finance the building, buying, and maintenance of large–scale infrastructure projects, such as bridges, roads, dams, hospitals, and universities, but also provide tax benefits to the investors. SBI Infrastructure bonds are one of the most popular infrastructure bonds in India and offer a wide range of features and benefits. The State Bank of India (SBI) Infrastructure Bonds are a type of bond issued by the premier Indian bank State Bank of India as a means of raising funds for the development of infrastructure in the country. These bonds offer a safe and secure investment option for people looking to invest in infrastructure projects. Besides offering attractive returns, these bonds also have various tax benefits, making them even more attractive. In this article, we will discuss the various merits of SBI Infrastructure Bonds.
1. Returns On Investment: The returns on SBI Infrastructure Bonds are quite attractive. Depending on the tenor of the bonds, these bonds are likely to yield returns between 9–12%. This is quite attractive considering the fact that these bonds provide guaranteed returns. Moreover, since these bonds are tax–free instruments, the effective returns are even higher as investors are not required to pay taxes on the returns earned.
2. SafetyOf Investment: One of the major advantages of investing in SBI Infrastructure Bonds is the safety of the investment. These bonds are secured instruments, backed by the government of India. This means that investors are likely to get their principal investment back irrespective of the performance of the bond. This gives investors the peace of mind that their investment is safe and secure.
3. Tax Benefits: The main advantage of investing in SBI Infrastructure bonds is that they offer tax benefits. These bonds are eligible for tax deduction under Section 80CCF of the Income Tax Act. This deduction can be upto Rs 200,000 per financial year. This means that you can save a lot of money in taxes by investing in SBI Infrastructure bonds. These bonds are exempt from all kinds of taxes, including wealth, long–term capital gains, short–term capital gains, and income tax. This provides investors with the opportunity to invest in these bonds without having to worry about any kind of taxes.
4. Liquidity: These bonds are liquid instruments. They are listed on major stock exchanges, including the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and others. This means that investors have the option to sell the bonds any time they want. This makes it easier for investors to liquidate their investments in case of any unforeseen circumstances.
5. Low Risk: SBI Infrastructure Bonds are considered to be one of the safest investments available in the Indian market. As these bonds are secured instruments and backed by the government of India, the risk of default is quite low. Moreover, since these bonds are tax–free instruments, the investors do not have to worry about any kind of tax liabilities. This makes these bonds a relatively risk–free investment option.
Despite all of these benefits, there are some drawbacks to SBI Infrastructure bonds as well. The first is that the returns on these bonds are lower than other debt instruments such as fixed deposits or other bonds. Another downside of these bonds is that there is a lock-in period of 5 years which means that you cannot withdraw your investments before the lock-in period is over. Additionally, these bonds are prone to price fluctuations and can be highly volatile in nature.
To summarize, investing in SBI Infrastructure bonds can be a great way to generate long-term returns with tax benefits. However, these bonds also come with certain risks such as price fluctuations and have a lock-in period of 5 years. Therefore, it is important to evaluate all the risks and benefits of such investments before investing in SBI Infrastructure bonds. Conclusion SBI Infrastructure Bonds offer a safe and secure investment option with attractive returns. These bonds are also exempt from all kinds of taxes, providing investors with the opportunity to earn higher returns. Moreover, as these bonds are liquid instruments, investors have the option to sell them any time they want. All these factors make SBI Infrastructure bonds an attractive investment option for investors.
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