The Central Government have authorized the Indian Railway Finance Corporation (IRFC) to issue tax-free, secured, redeemable, non-convertible bonds of the total value of Rs.5,000 crore carrying an interest rate in the range of 6.50% to 7.25% per annum, through public issue or otherwise by 31st March 2010. The interest income on investment in these bonds will be exempt from income tax under item (h) of sub-clause (iv) of clause (15) of section 10 of the Income-tax Act, 1961 in the hand of the person in whose name such bonds are registered.

Nice to Know:

• The interest earned is tax free.
• Not included in 80C deductions. So you can consider this on top of your 80 C deductions.

Please note that the above article is presented as a news and not as an investment advice. Please read the offer / related document for more details. For more information on this press release please visit income tax department website.

*Updated for FY 2009 – 2010

The Government is exploring an increase in the income tax exemption limit for individuals to compensate for the high inflation, but revenue considerations and the fact that the limit was hiked sharply in 2008-09 could force it to maintain status quo or give just a token hike. The proposal has figured in the preliminary discussions, as the policymakers debated ways to give some relief to households from high inflation. A Final decision is likely over the next three weeks as the budget-making process gathers momentum.

The government had substantially hiked the exemption limit in the budget 2008-09 and given a token Rs.10, 000 hike in the final budget for 2009-10, after the United Progressive Alliance came back to power in 2009 elections.

The new draft direct taxes code, which is also being given finishing touches with the government looking to introduce it in the budget session, proposes to exempt an individual from paying income tax if his income is up to Rs.1, 60,000 a year. Any income in excess of Rs. 1.6 lakh and up to Rs. 10 lakh would attract a rate of 10 %. Besides, the code also proposes to raise investment limit to Rs. 3 lakh from current   Rs. 1 lakh. There is also a thinking in the government that since the new code proposes to include all perks including that of government employees in the total income, the exemption limit needs to be raised and this budget may be an opportune time to at least indicate the government intent in that direction, the finance ministry official said.

Source: The Economic Times – 21-Jan-2010.

Check here for 2009 – 2010 income tax limit / income tax slab