Here's what it does:
1. An investment of Rs. 20,000 will earn 8% compounded annually
2. The saving of Rs. 6000 of income tax, assuming highest tax bracket
3. Assuming that the tax saving is invested in an scheme that provided 25% compounded annual return. Note that 25% annual return are actually very difficult to obtain over 5 years, the lock-in period. Still let's go ahead
4. Effectively, after 5 years, investing in Infrastructure Bonds give Rs 47,697.11
5. Had the same Rs. 20,000 invested in a non tax saving scheme for 5 years, an annual return of 19% will give the same return of Rs. 47,697.11. If the tax saving is lesser than Rs. 6000, or the return on saved tax is lesser than 25%, then even a lesser return will fetch better returns.
In summary, its better to invest Rs. 20,000 in a well reputed open ended mutual fund, than in infrastructure bonds. You have the liquidity to withdraw the money at any time, and you get better returns. In fact the best thing to do would be to go via "Systematic Investment Plans". Just setup an auto-debit of Rs. 2000 from your bank account to any good mutual fund and after 5 years you'd make better returns than Infrastructure bonds :)
