The tenure will be 10 years with or without coupons can come with call/put options for investors to choose from. There will be a lock-in for 5 years. Even private players can issue such bonds once got notified in this category.
The first of its class is available now
Section 80CCF of the Income-tax Act, 1961 – Deduction – In respect of subscription to long-term infrastructure bonds – Notified long-term infrastructure bond
Notification No. 48/2010[F.No.149/84/2010-SO(TPL)], dated 9-7-2010
In exercise of the powers conferred by section 80CCF of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies bonds, subject to the following conditions, as long-term infrastructure bonds for the purposes of the said section namely :-
(a) Name of the bond – The name of the bond shall be “Long-term Infrastructure Bond”.
(b) Issuer of the bond – The bond shall be issued by :-
(i) Industrial Finance Corporation of India;
(ii) Life Insurance Corporation of India;
(iii) Infrastructure Development Finance Company Limited;
(iv) a Non-Banking Finance Company classified as an Infrastructure Finance Company by the Reserve Bank of India;
(c) Limit on issuance – (i) The bond will be issued during financial year 2010-11;
(ii) the volume of issuance during the financial year shall be restricted to twenty-five per cent of the incremental infrastructure investments made by the issuer during the financial year 2009-10;
(iii) ‘Investment’ for the purposes of this limit include loans, bonds, other forms of debt, quasi-equity, preference equity and equity.
(d) Tenure of the bond. – (i) A minimum period of ten years:
(ii) the minimum lock-in period for an investor shall be five years:
(iii) after the lock in, the investor may exit either through the secondary market or through a buyback facility, specified by the issuer in the issue document at the time of issue;
(iv) the bond shall also be allowed as pledge or lien or hypothecation for obtaining loans from Scheduled Commercial Banks, after the said lock-in period;
(e) Permanent Account Number (PAN) to be furnished – It shall be mandatory for the subscribers to furnish there PAN to the issuer;
(f) Yield of the bond – The yield of the bond shall not exceed the yield on government securities of corresponding residual maturity, as reported by the Fixed Income Money Market and Derivatives Association of India (FIMMDA), as on the last working day of the month immediately preceding the month of the issue of the bond;
(g) End-use of proceeds and reporting or monitoring mechanism – (i) The proceeds shall be utilizes towards ‘ infrastructure lending’ as defined by the Reserve Bank of India in the Guidelines : issued by it ;
(ii) the end-use shall be duly reported in the Annual Reports and other reports submitted by the issuer to the Regulatory Authority concerned, and specifically certified by the Statutory Auditor of the issuer;
(iii) the issuer shall also file these along with term sheets to the Infrastructure Division, Department of Economic Affairs, Ministry of Finance within three months from the end of financial year.
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