The central government today approved the issue of tax-free bonds by the Indian Railway Finance Corporation (IRFC) and the National Bank of Agriculture and Rural Development (NABARD).
The government has authorised the IRFC to issue tax-free, secured, redeemable, non-convertible bonds of a value of Rs5,000 crore.
The bonds, carrying an interest rate between 6.50 per cent and 7.25 per cent per annum, will be sold through public issue or otherwise by 31 March 2010, a government release said.
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, the release said.
The government also approved the issue of 95,20,000 10-year zero-coupon `Bhavishya Nirman Bonds' by the National Bank of Agriculture and Rural Development (NABARD). The bonds, to be issued by 31 March 2010, would also be eligible for tax concessions under sub-section 48 of section 2 of the Income Tax Act, 1961.
Income from the Rs20,000 bonds will be taxed only on maturity as capital gain.