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Home / Saving Schemes

Tax Saving Bonds (Infrastructure Bonds)

In order to generate funds for building and maintenance of infrastructure, the government has declared amounts invested in Infrastructure Bonds to qualify under Section 88 for a maximum limit of Rs.80,000/-, while the rebate stands at 20 percent.

In other words, any individual can invest Rs.20,000/- in Infrastructure Bonds exclusive to the Rs.60,000/- in other investment schemes supported by LIC, PPF, NSC, etc. One of the main advantages under this scheme has that it offers the lowest lock-in period of 3 years.

An investor buys bonds worth Rs.80,000/- for 3 successive years. In the 4th year, he sells the bonds purchased in the 1st year. He retains the capital gains by using 54EB and uses the capital amount to buy similar Bonds in the 4th year. If the investor goes on repeating this procedure in the subsequent years, this strategy will require only Rs.2,40,000/- for earning the full tax rebate for the rest of his life span.

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