New Delhi, Sept. 13: The Industrial Development Bank of India (IDBI) has decided to issue tax-saving infrastructure bonds at a competitive rate of interest in the band width of 8-9 per cent which will carry a maturity period of three-seven years.
“The bonds will raise Rs 3,000 crore and fund the infrastructure sector for which there is a growing demand,” a senior IDBI official said. The matter is awaiting the Securities and Exchange Board of India’s (Sebi) approval and the bonds should hit the market before the month end, he added. The bonds will carry a tax-rebate under Section 88 of the Income Tax Act.
Analysts say the issue will see through despite depressed market conditions as there is a dearth of such tax savings schemes. “The salaried class starts saving during the first four-five months of the fiscal year and begins investing in such tax-saving schemes from September-October,” Surajit Mishra, associate vice-president, Bajaj Capital told The Telegraph. Consequently, he said, the issue will find many takers.
In this year’s annual budget the government has increased the overall investment limit to Rs 1,00,000 up from Rs 80,000, which can be covered by infrastructure bonds. This translates to a 15 per cent tax-savings on purchase of Rs1,00,000 worth of infrastructure bonds, he said.
IDBI’s proposed infrastructure-bonds follows similar bonds issued by other financial institutions like Sidbi, Nabard and National Housing Bank.
Last week, the government said tax-free bonds, exempted from income and wealth tax, will be issued from October 1. They will carry a 7 per cent interest rate with a maturity of six years.