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New Delhi, Jan. 7 The Finance Ministry has allowed Nabard to issue rural bonds worth Rs 5,000 crore with some tax benefits for certain categories of investors.

An individual and a Hindu Undivided Family (HUF) investing in such bonds from April 1 this year can avail himself of Section 80C benefit, which implies that amounts invested up to existing ceiling limit of Rs 1 lakh in Nabard bonds could be claimed as deduction against income for income tax purposes.

Under Section 80C of the Income-Tax Act, assesses could claim deduction of up to Rs 1 lakh on investments made in life insurance premium, provident funds and public provident funds (PPFs) etc. Now, Nabard rural bonds have also been brought within its ambit from April 1, 2008. With a view to encourage small savings , the Government had recently taken a policy decision to include investments made in five year post office time deposit account and senior citizen savings scheme within the ambit of Section 80C.

Two years ago, the Government had specified that investments made, from April 1, 2007, in term deposits for a fixed period of 5 years with any scheduled bank would be eligible for deduction under Section 80C.

More Stories on : Income Tax | Govt Bonds | Agricultural Institutions

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