NHAI, PFC to launch infra bonds by mid-December

State-owned NHAI and PFC will raise over Rs 14,000 crore by way of infrastructure bond issues by December 15, a finance ministry official said.

"NHAI will raise Rs 10,000 crore and PFC will raise Rs 4,100 crore. The infra bond issues are likely by December 15," the official said.

The official said that Railway Finance Corporation has also got clearance to raise Rs 10,000 crore through infra bonds, but it will come out with the issue after assessing demand for the NHAI papers.

Infra bonds save tax but don't suit all investors

With a view to attracting long-term investments for the infrastructure sector, the government has allowed NHAI, Railway Finance Corporation, HUDCO and ports to raise Rs 30,000 crore through tax-free bonds in the current fiscal.

"Railway Finance Corporation will take final decision on issuing infra bond after seeing response of NHAI and PFC. The next meeting on infra bond will be held on December 25," the official added.

Earlier, Railway Finance Corporation had said they had received finance ministry clearance to issue tax-free bonds to raise around Rs 10,000 crore to tide over the funds crunch.

While the National Highway Authority of India's (NHAI) bond would be tax free, subscribers of the one issued by Power Finance Company (PFC) would get tax exemptions on investments up to Rs 20,000.

To channelise savings for development of infrastructure sector, the government in 2010-11 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 1 lakh.

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.