The Government has been making concerted efforts to attract greater foreign investment into India with special thrust on availability of off-shore funds for infrastructure development. In order to attract greater foreign investment to the infrastructure sector, following measures have been taken:
i) The limit for foreign investment in long term corporate bonds in the infrastructure sector has been enhanced from USD 5 billion to USD 25 billion.
ii) The USD 25 bn scheme for foreign investment in long term infra bonds has been gradually liberalized by inter-alia reducing residual maturity criteria and removing lock-in period restriction.
iii) The debt limit allocation mechanism for FIIs has been rationalized by allowing reinvestment facility to FIIs; reduction in utilisation period of debt limits and allowing to avail debt limits upto 90% without obtaining SEBI approval in case of long term infra bonds.
iv) Infrastructure Debt Funds (IDFs) have been set up to accelerate and enhance the flow of long term debt in infrastructure projects. To attract off-shore funds into IDFs, withholding tax on interest payments on borrowing by IDFs has been reduced from 20% to 5%.
v) Further, the rate of withholding tax has been reduced from 20% to 5% on interest payments in respect of foreign currency borrowings and long term infrastructure bonds.
This was stated by the Minister of State for Finance, Shri Namo Narain Meena in a written reply to a question in the Lok Sabha on Friday.