Govt waives three-year lock-in period on investments made by NRIs in IDFs

With an aim to accelerate and enhance flow of long-term debt in infrastructure projects, amendments in the tax laws were made to provide exemption from income tax to infrastructure debt funds in 2011

The government has waived the three-year lock-in period on investments made by non-residents in infrastructure debt funds (IDFs), to promote funding in the infrastructure sector. A notification had been issued by the Central Board of Direct Taxes (CBDT).

With an aim to accelerate and enhance flow of long-term debt in infrastructure projects, amendments in the tax laws were made to provide exemption from income tax to infrastructure debt funds (IDFs) in 2011.

To attract off-shore investments into IDFs, any amount of interest received by non-resident or foreign company from investment in such IDFs is charged at a reduced tax rate of 5 per cent, said Taxmann Deputy General Manager Naveen Wadhwa.

IDFs are investment vehicles to accelerate the flow of long-term debt to the sector.

Wadhwa said if a non-resident transfers rupee-denominated bonds of IDF to another non-resident outside India, such transfer is not regarded as transfer for the purpose of capital gain, and no capital gain tax is charged on such transfer.