Tax Saving Infra Bonds pipeline : IFCI, IDFC, IIFCL

With a view to attracting long-term investments for the infrastructure sector, the Government has allowed IFCI, LIC, IDFC, IIFCL and certain NBFCs to issue tax-saving bonds during the current fiscal.

"The volume of issuance during the financial year shall be restricted to 25 per cent of the incremental infrastructure investments made by the issuer during 2010-11," the Finance Ministry said.
Besides, Industrial Finance Corporation of India (IFCI), Life Insurance Corporation (LIC), Infrastructure Development Finance Company (IDFC) and India Infrastructure Finance Company Ltd (IIFCL), non-banking financial companies (NBFCs) classified as infrastructure finance company by RBI will be able to issue tax-saving bonds.
In 2010-11 the government in order to channelise savings for development of infrastructure sector, introduced the concept of long-term tax savings bond.
It provides tax exemption on investments up to Rs 20,000 in long-term infrastructure bonds. This is over and above the existing tax saving limit of Rs one lakh.
The Finance Ministry further said that infrastructure bonds should be of 10 years with a minimum lock-in of 5 years.
After the expiry of 5 years, the investors would have the option to either sell it in secondary market or seek redemption.
Earlier, the government had announced relaxation of norms for FII investment in infrastructure sector, besides allowing corporates to raise Yuan-linked External Commercial Borrowings (equal to USD 1 billion).
The government proposes to double investment in infrastructure to USD 1 trillion during the 12th Five Year Plan (2012-17).
Last fiscal a host of companies like IFCI, REC and IDFC had raised about Rs 8,000 crore through issue of tax-savings infra bonds.