Today,season of NCDs and tax saving infrastructure bonds is on.Normal procedure is that first investor needs to apply and bonds are alloted as per response to the issue.Application money remains with the issuers account from date of application of investor till allotment date.. if investor do not get allotment then money is refunded to the investor.There is no uniform rule about interest on application and refund money.Here is comparision of interest rates offered by latest issue :
| Issue | Interest Rate on Application /Refund Money |
| PFC | 4.5% per annum on application money & 4% pa on Refund money |
| IFCI | Interest rate similar to the issue for corresponding period |
| IDFC | NIL |
| L&T | NIL |
| Muthoot Finance | 8% per annum. |
| REC | Interest rate similar to the issue. |
E.g:If anyone have applied for IFCI tax saving series-3 issue on 12th Oct 2011 then investor have received the interest for period of 60 days (from 12th Oct to allotment date -12 th Dec)..with interest rate of 8.5% p.a.and it will be approximately Rs.280.
There are few issues which do not offer interest on application money..Isn’t it unethical ? what do you think?
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Senior Citizens & Personal Finance:
With NCD of Muthoot Finance, how is taxation done upon maturity. Say I invested Rs.10,000 in cumulative NCD for 66mnths, the investment is said to double, that is, to Rs.20,000. But it is taxable income. So what is the ‘actual profit’ one can make on such investments, post-taxes? Please elaborate
Meena,
First of all we have to note one thing that most of the debt investments are subject to taxation.so we need to compare this issue against other NCds as well against fixed deposits.For even highest taxable income i.e.30%,net returns comes to be at least 10% annually.
Investor can show income from this NCD annually or at the end of period also.