Budget 2011-12 – Exemption to notified Infrastructure Debt Fund

In order to augment long-term, low cost funds from abroad for the infrastructure sector, it is proposed to facilitate setting up of dedicated debt funds.

Section 10 of the Income-tax Act excludes certain incomes from the ambit of total income. It is proposed to amend section 10 of the Income-tax Act so as to provide enabling power to the Central Government to notify any infrastructure debt fund which is set up in accordance with the prescribed guidelines. Once notified, the income of such debt fund would be exempt from tax. It will, however, be required to file a return of income.

It is also proposed to amend section 115A of the Income-tax Act to provide that any interest received by a non-resident from such notified infrastructure debt fund shall be taxable at the rate of five per cent. on the gross amount of such interest income.

It is further proposed to insert a new section 194LB to provide that tax shall be deducted at the rate of five per cent. by such notified infrastructure debt fund on any interest paid by it to a non-resident.

These amendments are proposed to take effect from 1st June 2011.

[Clauses 4, 15, 23, 27]

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