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MUMBAI, May 10

RURAL Electrification Corporation (REC) today launched two tax-savings bond issues aimed at middle-class tax payers. The bonds offer both Section 88 and Section 80L tax benefits to investors. The debt instruments have been granted a triple A ( `AAA') from Crisil.

The Corporation plans to raise about Rs 2,000 crore through these two instruments which will be on tap throughout the financial year, Mr Divakar Dev, Chairman and Managing Director, REC, told reporters here today.

The 54-EC Capital Gains tax exemption bonds aimed at the upper middle-class investors will have a face value of Rs 10,000 per bond with a minimum investment of Rs 1 lakh, while `Redeemable Taxable Infrastructure Bonds' have a minimum investment limit of Rs 5,000 per bond.

The Capital gains bonds will offer investors a lock-in period of three years with eight per cent interest earnings and an average yield of 8.17 per cent. After 36 months, interest on capital gains bonds will be according to prevailing interest rates, which will be announced after 34 months, Mr Dev said.

"Investments in the Infrastructure bonds will provide income-tax benefits under Section 88. The bonds will entitle tax payers a reduction in tax liability of Rs 15,000 on an investment of Rs 1 lakh in the year of investment,'' Mr Dev said. In the subsequent years, benefits of Section 80L will be added on with an yield of 9 per cent tax-free income.

Both bonds can be purchased from the company or offices of HDFC, Canara and Corporation Banks as also from other dealers in the market.

This is the second time that the company has floated bonds in the market. Last year, REC had mopped up Rs 1400 crore through its bonds issue, Mr Dev said.

REC provides financial assistance to State Electricity Boards, State Government Departments and across the country.

The company reported a net profit of Rs 388 crore (Rs 345 crore) for the year ended March 31, 2002 with a net worth of Rs 2,467 crore (Rs 2,148 crore).

Loan disbursements during the year stood at Rs 4,722 crore as against sanctioned loans of Rs 6,764 crore. Recoveries during the year amounted to Rs 4,050 crore (Rs 3,582 crore).

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