Non-Banking Financial Company’s Infrastructure Debt Fund (IDF), raising money through External Commercial Borrowing (ECB), will be eligible for Income Tax exemption. Income Tax Department has notified amendment in rules for exemption.
According to the notification, IDF can now issues three categories of instruments to raise money. First one is rupee denominated bonds or foreign currency bonds in accordance with the directions of Reserve Bank of India (RBI) and the relevant regulations under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. Second would be zero coupon bonds while the third could be external commercial borrowings in accordance with the directions of the Foreign Exchange Department of the RBI.
Bonds being issued to non-resident investor has a minimum maturity of 5 years. Now, same conditions will be applied for ECB. Also, borrowing will not be sourced from foreign branches of Indian banks. Now a new condition has been added. “No investment shall be made by the Infrastructure Debt Fund in any project where its specified shareholder or the associated enterprise or the group of such specified shareholder has a substantial interest,” it said. Further, no investment will be made by the IDF in any project where its sponsor or the associate enterprise or the group of such sponsor has a substantial interest.
Investment rules
Regarding investment, the notification said it can be done only post commencement operation date infrastructure projects which have completed at least one year of satisfactory commercial operations. It could be direct lender in toll-operate-transfer (TOT) projects. Earlier, it was said that investment can be done only in post commencement operation date infrastructure projects which have completed at least one year of satisfactory commercial operations. These projects could be Public Private Partnership Projects, Non-Public Private Partnership Projects and Public Private Partnership Projects without a project authority.
Bond being issued to non-resident investor has a maturity upto 5 years. Now same conditions will be applied by ECB. Also, borrowing will not be sourced from foreign branches of Indian banks. Now a new condition has been added. “No investment shall be made by the Infrastructure Debt Fund in any project where its specified shareholder or the associated enterprise or the group of such specified shareholder has a substantial interest,” it said. Further, no investment will be made by the IDF in any project where its sponsor or the associate enterprise or the group of such sponsor has a substantial interest.
The notification also added definition of ‘specified shareholder’. Such a shareholder means a non-banking financial company, or a bank, or any other person holding, directly or indirectly, shares carrying not less than thirty per cent of the voting power in IDF.
The new notification has been issued at a time, when the Finance ministry has suggested that banks and non-banking financial companies (NBFCs) increase their participation in financing large-scale infrastructure initiatives, which are crucial for India’s ambition to achieve developed nation (Viksit Bharat) status by 2047. “There is a need for pooling resources by NBFCs and banks so they can finance large projects,” Financial Services Secretary M Nagaraju saidrecently.