<p> Introduced in the last year’s Budget, the tax-exempt bonds may be discontinued this year as they have scarcely served the purpose of promoting long term investment in infrastructure sector.<br /><br />Although there is still time for a final decision on this, officials in the finance ministry say that these bonds are causing loss of revenue to the tax department.<br /><br />Statistics over a period of time has shown that the money brought in by these bonds are not going into creation or development of infrastructure sector, instead, benefiting some high-bracket individuals and companies.<br /><br />It (tax-free bonds) has not attracted much revenue to the exchequer in the last one year. Instead there is loss of revenue to the tax department,” a tax department official said.<br /><br />He, however, said that if benefits were not given to people, they will not invest in bonds at all. In the last budget, the government had discontinued tax-saving bonds largely because they did not bring desired results.<br /><br />Analysts say the market for tax-exempt bonds is inefficient apparently because most of these are held by high net worth individuals. There is a need to make these bonds attractive to taxpayers in lower brackets.<br /><br />In last Budget, the government had allowed 10 state-run companies to raise Rs 60,000 crore by issuing tax-free bonds, against Rs 30,000 crore the previous year. The interest earned on such bonds by an investor is exempt from income tax.</p>.<p> Despite that much of these have failed to attract investors, according to data of Power Finance Corporation, Indian Railway Finance Corporation and National Highway Authority of India.<br /><br />Analysts say, lower interest rates on tax-free bonds may have discouraged the retail investors from investing in them.<br /><br />Retail individual investors, qualified institutional buyers, corporate and high net worth individuals are eligible to subscribe to tax-free bonds with tenures of 10-15 years.</p>
<p> Introduced in the last year’s Budget, the tax-exempt bonds may be discontinued this year as they have scarcely served the purpose of promoting long term investment in infrastructure sector.<br /><br />Although there is still time for a final decision on this, officials in the finance ministry say that these bonds are causing loss of revenue to the tax department.<br /><br />Statistics over a period of time has shown that the money brought in by these bonds are not going into creation or development of infrastructure sector, instead, benefiting some high-bracket individuals and companies.<br /><br />It (tax-free bonds) has not attracted much revenue to the exchequer in the last one year. Instead there is loss of revenue to the tax department,” a tax department official said.<br /><br />He, however, said that if benefits were not given to people, they will not invest in bonds at all. In the last budget, the government had discontinued tax-saving bonds largely because they did not bring desired results.<br /><br />Analysts say the market for tax-exempt bonds is inefficient apparently because most of these are held by high net worth individuals. There is a need to make these bonds attractive to taxpayers in lower brackets.<br /><br />In last Budget, the government had allowed 10 state-run companies to raise Rs 60,000 crore by issuing tax-free bonds, against Rs 30,000 crore the previous year. The interest earned on such bonds by an investor is exempt from income tax.</p>.<p> Despite that much of these have failed to attract investors, according to data of Power Finance Corporation, Indian Railway Finance Corporation and National Highway Authority of India.<br /><br />Analysts say, lower interest rates on tax-free bonds may have discouraged the retail investors from investing in them.<br /><br />Retail individual investors, qualified institutional buyers, corporate and high net worth individuals are eligible to subscribe to tax-free bonds with tenures of 10-15 years.</p>
