This year onward, there will be no tax benefit from Infrastructure Bonds. So on one hand Mr. Pranab Mukherjee gave some extra money by increasing basic exemption limit by 20,000 Rs and with other hand he took back more by taking back 20,000 tax deduction provided under section 80CCF using Long term infrastructure bonds.
Initially this section was introduced in FY 2010-11 for one year and then was extended for FY 2011-12. But contrary to experts’ opinion of increase in this limit, FinMin choose to not mention anything about 80CCF and thus removing it from picture.
20000 increase in basic exemption limit provided 2000 extra to every men. But removal of infra bonds results in extra tax of same 2000 for Men in 10% limit, 4000 for 20% tax limit and 6000 for 30% tax limit. (Not including cess and other changes). For women tax payers, condition is even worse. With no change in basic exemption limit for them it could only be bad for them.
This is negative not only for individuals but infrastructure companies as well. Long term infra bond was source of low interest capital for these companies. Now after removal of this tax benefit from investors, these companies will have to go to market for fund raising on higher interest rates. In country like India where condition of infrastructure is already bleak; I am not sure how removal of provisions of 80CCF will work for Greater Good.