PFC
Power Finance Corporation (PFC) has entered the capital market on 30th December, 2011 with an issue of Tax Free Bonds of face value of Rs.1,000 each, in the nature of Secured Redeemable Non Convertible Debentures. Issue will close on 16th January, 2012, with issue size of Rs.1,000 crores, with an option to retain an oversubscription upto the shelf limit being at Rs.4,033.13 crores. Bonds are proposed to be listed on BSE. Some of the features of this issue are:-
1) The income by way of interest on these Bonds shall not form part of total income as per provisions under section 10 (15) (iv) (h) of I.T. Act 1961;
2) There shall be no deduction of tax at source from the interest, which accrues to the bondholders in these bonds irrespective of the amount of the interest or the status of the investors;
3) As per provisions under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed Bond is treated as a long term capital asset if the same is held for more than 12 months immediately preceding the date of its transfer. Under section 112 of the I.T. Act, capital gains arising on the transfer of listed Bonds shall be taxed @ 10% without indexation;
4) Wealth Tax is not levied on investment in Bond under section 2(ea) of the Wealth Tax Act, 1957.
Bonds have two series with features as under:-
| Options | Tranche-1 Series(1) | Tranche-1 Series(2) |
| Tenor | 10 Years | 15 Years |
| Redemption Date | At par at the end of 10th year from the Deemed Date of Allotment | At par at the end of 15th year from the Deemed Date of Allotment |
| Redemption Amount (Rs/Bond) | Repayment of the Face Value plus any interest that may have accrued at the Redemption Date | Repayment of the Face Value plus any interest that may have accrued at the Redemption Date |
| Frequency of Interest Payment | Payable Annually | Payable Annually |
| Minimum Application Size | Rs.10,000 (10 Bonds) | Rs.10,000 (10 Bonds) |
| In Multilpes of | Rs.5,000 (5 Bonds) | Rs.5,000 (5 Bonds) |
| Face Value (Rs/Bond) | Rs.1,000 | Rs.1,000 |
| Issue Price (Rs/Bond) | Rs.1,000 | Rs.1,000 |
| Coupon Rate (%) p.a. | 8.20% | 8.30% |
Considering the tax free income to be earned from the Bonds and in view of falling interest regime scenario ahead, it is advised to subscribe to Bonds Tranche-1 Series(2) with tenure of 15 years.