Govt permits 10-yr bonds to bridge infra gap

The government has allowed floating of tax-free long-term infrastructure bonds issued by Industrial Finance Corporation of India, Life Insurance Corporation of India, Infrastructure Development Finance Company Limited and non-banking finance companies to bridge the country’s infrastructure deficit.

The government has allowed floating of tax-free long-term infrastructure bonds to help meet huge cash requirements to bridge the country’s infrastructure deficit.

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The bonds will be issued by Industrial Finance Corporation of India, Life Insurance Corporation of India, Infrastructure Development Finance Company Limited and non-banking finance companies classified as infrastructure finance companies by the Reserve Bank of India (RBI).

Investment in these bonds up to Rs 20,000 will be eligible for deduction from the total income of the subscriber. “The deduction will be in addition to the deduction of Rs 1 lakh allowed under sections 80C, 80CCC and 80CCD of the Act,” a finance ministry statement said.

The tenure of the bonds shall be a minimum of 10 years with a lock-in period of five years.

India needs about $ 1 trillion (about Rs 46 lakh crore) over the next 10 years to build highways, ports and airports, but an underdeveloped long-term bond market kept capital out of the cash-starved sector.

The government has announced plans to launch an $11 billion (Rs 50,000 crore) fund for infrastructure. Finance Minister Pranab Mukherjee had announced in this year’s budget that the government will issue long-term infrastructure bonds, eligible for income tax relief, to fund infrastructure projects.