Government, with a view to promote infrastructure sector has permitted IDFC (Infrastructure Development Finance Company),IFCI(Industrial Finance Corporation of India), LIC(Life Insurance Corporation) IIFCL(India Infrastructure Finance Company Ltd) and certain NBFC’s(non-banking financial companies) identified as infrastructure finance company by RBI to issue tax saving bonds in the current financial year.

The basic idea of government is to attract long term investment for the development of infrastructure sector. As because of this, the Government has included long term saving bonds in the range of Section 80CCF of the Income Tax Act. A tax exemption on investment up to Rs. 20,000 annually in any such long term infrastructure bonds is an additional benefit available to investors.

This exemption limit is over and above the present tax saving limit of Rs. one lakh. The volume of issue is limited to 25% of the incremental infrastructural investments made by the issuer last fiscal year, i: e 2010-2011. The bonds will be listed on both the exchanges i: e, NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). Well the Finance Minister, Mr. Pranab Mukherjee has said that, this infrastructure bonds will have a maturity of 10 years with a minimum lock-in period of 5 years. After completion of 5 years, the investors if wishes so, can wind it up by either selling it in secondary market or can go for redemption.

Well IDFC (Infrastructure Development Finance Company), proposes to raise Rs. 5000 crore through this route of tax saving bonds this year. The bond will be having a face value of Rs. 5000 and the proceeds from the issue will invested in infrastructure sector. IDFC has raised Rs. 1400 crore by way of tax saving bonds in the last financial year, i: e, 2010-2011. The lead managers of the issue appointed by the company are, J M Financial, ICICI Securities, Karvy Investor Services, Kotak Mahindra Capital and IDFC Capital.

DETAILS OF THE ISSUE:

Last financial year, a couple of companies like, IFCI, REC and IDFC have raised Rs 8,000 crore. The Government proposes to generate USD 1 trillion during the 12^th five year plan, (2012-2017) for investment in infrastructure sector.

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