FIs can issue tax saving infra bonds

“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,” 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.

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 1 lakh.

The finance ministry further said infrastructure bonds should be of 10 years with minimum lock-in of 5 years. After expiry of 5 years, investors would have the option to either sell it in secondary market or seek redemption.

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