FinMin allows IRFC to issue Rs 5,000-crore tax-free bonds

The finance ministry today allowed the Indian Railway Finance Corporation (IRFC) to issue Rs 5,000 crore of tax-free bonds, carrying an interest rate in the range of 6.50-7.25 per cent per annum by March 31, 2010.

The interest income on investment in these bonds will be exempt from income tax under item (h) of sub-clause (iv) of clause (15) of section 10 of the Income-tax Act, 1961 under whose name the bonds would be registered, an official statement said.

“The Central Government have authorised IRFC to issue tax-free, secured, redeemable, non-convertible bonds of the total value of Rs.5,000 crore carrying an interest rate in the range of 6.50 per cent to 7.25 per cent per annum, through public issue or otherwise by 31st March 2010,” the release said.

The government had also allowed the National Bank of Agriculture and Rural Development to float 10-year zero-coupon bonds by end-March. The income on such bonds would be taxed only on maturity as capital gain.