Tax relief to investors on capital gains tax bonds will continue in 2008-09. Such bonds are issued by public sector agencies that are implementing infrastructure projects.
Section 54EC of the Income-Tax Act provides tax exemption to capital gains arising from the transfer of a long-term capital asset, if such gains are invested in notified bonds.
This will allow, investments in bonds issued by National Highways Authority of India (NHAI) and the Rural Electrification Corporation Limited (REC), to avail of capital gains tax waivers.
Sources said tax exemption would be extended, as the NHAI and REC are unlikely to achieve their targets for the bonds. Both the entities were to raise Rs 6,500 crore in the current fiscal as per the provisions of the Budget 2007-08.
But NHAI could raise only about Rs 140 crore from the bonds till January end and it expects to raise a total of Rs 500-600 crore by the end of the fiscal as against bonds worth Rs 2,000 crore it had issued in October.
REC, on its part, plans to raise Rs 4,500 crore through such bonds this fiscal. While it declined to comment on the quantum of funds it has raised so far through the issue of these bonds this fiscal, market analysts said it too is likely to fall short of the target.
The Central Board of Direct Taxes (CBDT) has agreed to extend the scheme into 2008-09 so that both REC and NHAI can raise the remaining funds, sources said.
The move would also be well in place with the government?s focus on increasing investments in the infrastructure sector, which is estimated to require investments to the tune of over $ 350 billion during the Eleventh Five-Year Plan.