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FinMin likely to deny PSUs to issue tax-free bonds in FY14

By Religare

FinMin likely to deny PSUs to issue tax-free bonds in FY14
Bringing some changes in the practice of parking of funds by the state run companies, the finance ministry is likely to deny the companies to float tax-free bonds in the forthcoming Budget.

The step is taken after understanding the current practise wherein the companies are mostly parking the funds in debt instruments to earn interest income, which is failing to the purpose of according tax benefit to bonds.

"Instead of directing the funds raised from tax free bonds towards infrastructure development, public sector companies issuing these bonds park the money into fixed deposits and earn interest," said a Finance Ministry official to media.

The Finance Ministry may not allow state-owned companies as they have not been utilising the funds raised through these instruments for infrastructure development. The government had in 2012-13 allowed state-owned financial institutions to raise about Rs 60,000 crore from tax-free bonds, as compared to Rs 30,000 crore in the previous fiscal.

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