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Govt waives 3-year lock-in period on NRI investments in IDF bonds

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On September 17, 2019, In order to boost foreign investment in the infrastructure sector, waived off the 3-year lock-in period for investments made by Non-Resident Indians(NRI) in Infrastructure Debt Funds (IDFs), as notified by the Central Board of Direct Taxes (CBDT).NRI investments in IDF bondsKey points

  • To enhance infrastructure project flows of long term debt, tax law amendments were made in 2011 to provide an income tax exemption to IDFs.
  • Tax rate for foreign companies: To attract offshore investments in IDFs which act as long term debt accelerators, any non-resident or foreign companies that receives interest amount, is charged at a reduced tax rate of 5%.
  • 3-year lock in period guidelines: Transferring Rupee denominated bonds of IDF by an NRI to another NRI outside India, are not considered as transfers for capital gain purpose and no capital gain tax is charged on such transfers. These benefits will be available only when IDF is set up under prescribed guidelines and fulfill certain conditions. One of such conditions is an investment made by an NRI in bonds should be subjected to a 3-year lock-in period except where the transfer is made to another non-resident. Thus, NRI investors can now transfer IDF bonds freely.
  • Govt. investment plan: Recently the govt has planned to invest Rs 100 lakh crore in the infrastructure sector by 2024-2025 with the task force headed by economic affairs secretary Shri Atanu Chakraborty.
  • IDF: They are investment pools sponsored by commercial banks and Non-Banking Financial Companies (NBFC) in India where domestic and overseas investors, especially pension and insurance funds can invest through bonds issued by IDF.

About CBDT:
Formation- 1944.
Chairperson- Pramod Chandra Mody.