Section 10(15), Item (h) of Sub-clause (iv) of the Income-tax Act, 1961 - Exemptions - Interest on Bonds/debentures - Notified Bonds or Debentures of Public Sector Companies
Notification No. 52/2011 was published on 23 September 2011. Its subject is Section 10(15), Item (h) of Sub-clause (iv) of the Income-tax Act, 1961 - Exemptions - Interest on Bonds/debentures - Notified Bonds or Debentures of Public Sector Companies.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Under item (h) of sub-clause (iv) of clause (15) of section 10 of the Income-tax Act, 1961, the Central Government authorises four entities to issue, during financial year 2011-12, tax-free, secured, redeemable, non-convertible bonds of Rs. 1,000 each on a public issue and Rs. 1,00,000 each in other cases: National Highways Authority of India up to Rs. 10,000 crores, Indian Railway Finance Corporation Ltd. up to Rs. 10,000 crores, Housing and Urban Development Corporation Ltd. up to Rs. 5,000 crores and Power Finance Corporation up to Rs. 5,000 crores. The tenure must be ten or fifteen years and the subscriber must furnish his Permanent Account Number to the issuer. Interest must be not less than 100 basis points below the yield on Government Securities of equivalent residual maturity reported by the Fixed Income Money Market and Derivative Association of India as on the last working day of the month preceding the month of issue, and in a public issue not less than 50 basis points below that yield.
SECTION 10(15), ITEM (h) OF SUB-CLAUSE (iv) OF THE INCOME-TAX ACT, 1961 - EXEMPTIONS - INTEREST ON BONDS/DEBENTURES - NOTIFIED BONDS OR DEBENTURES OF PUBLIC SECTOR COMPANIES
NOTIFICATION NO. 52/2011 [F.NO. 178/56/2011- (ITA-I)], DATED 23-9-2011
In exercise of the powers conferred by item (h) of sub-clause (iv) of clause (15) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby authorises the entities mentioned in column (2) of the table below, to issue, during the financial year 2011-12, tax free, secured, redeemable, non-convertible bonds of rupees 1,000 each in case of public issue and rupees 1,00,000 each in other cases, aggregating to amounts mentioned in column (3) of the said table, subject to the following conditions, namely:-
(a) Tenure of Bonds.- The tenure of the bonds shall be ten or fifteen years;
(b) Permanent Account Number.- It shall be mandatory for the subscribers to furnish their Permanent Account Number to the issuer;
(c) Interest rate. - The interest on the bonds shall be not less than hundred basis points lower than the yield on Government Securities of equivalent residual maturity as reported by the Fixed Income Money Market and Derivative Association of India, as on the last working day of the month immediately preceding the month of the issue of the bonds but in the case of a Public issue, the interest on the bonds shall be not less than 50 basis points lower than the yield on Government Securities of equivalent residual maturity;
(d) Commission on sale.- (i) in case of a public issue, the commission on sale shall be capped at a maximum of a flat fee of 1.25% of the issue size;
(ii) in case of a private placement- (a) for bonds with a tenure of ten years, the commission on sale shall be capped at a maximum of a flat fee of 0.1% of the issue size; (b) for bonds with a tenure of fifteen years, the commission on sale shall be capped at a maximum of a flat fee of 0.2% of the issue size.
(e) The benefit under the said section shall be admissible only if the holder of such bonds registers his or her name and the holding with the respective entities mentioned in column (2) of the said table.
TABLES.No.
Entities
Aggregate Amount of Bonds
(1)
(2)
(3)
1.
National Highways Authority of India
Rs. 10,000 crores
2.
Indian Railway Finance Corporation Ltd.
Rs. 10,000 crores
3.
Housing and Urban Development Corporation Ltd.
Rs. 5,000 crores
4.
Power Finance Corporation
Rs. 5,000 crores
nn
financial year 2011-12, being the year of issue authorised.
In a bondholder's return of income showing the interest as exempt, and in the offer document and interest payment record of the issuing entity.
On a fifteen-year private placement of Rs. 500 crores, the arranger's commission cannot exceed a flat 0.2 per cent of the issue size, that is Rs. 1 crore; on a public issue of the same size the cap is 1.25 per cent, that is Rs. 6.25 crores.
Source: the Income Tax Department’s own published text — its page for this instrument.