SECTION 10(15), ITEM (h) OF SUB-CLAUSE (iv)
OF THE INCOME-TAX ACT, 1961 - EXEMPTIONS - INTEREST ON BONDS/DEBENTURES
- SPECIFIED COMPANIES AUTHORIZED TO ISSUE TAX-FREE, SECURD, REDEEMABLE,
NON-CONVERTIBLE BONDS DURING F.Y. 2012-13
Notification No. 46/2012 [F. No. 178/60/2012-(ITA.1)], dated 6-11-2012
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
following Table to issue, during the financial year 2012-13. tax-free,
secured, redeemable, non-convertible bonds, aggregating to amounts
mentioned in column (3) of the said table, subject to the conditions
specified hereunder:-
(a) Eligibility.- The following shall be eligible to subscribe to the bonds:-
(i) Retail Individual Investors (RII);
(ii) Qualified Institutional Buyers (QIBs);
(iii) Corporates;
(iv) High Net Worth Individuals (HNIs);
(b) Tenure of bonds.- (i)
In the case of India Infrastructure Finance Company Limited (IIFCL),
the tenure of the bonds shall be for ten, fifteen or twenty years;
(ii) in other cases, the tenure of the bonds shall be for ten or fifteen years ;
(c) Permanent Account Number.- It shall be mandatory for the subscribers to furnish their Permanent Account Number to the issuer;
(d) Rate of interest.- (i) There shall be a ceiling on the coupon rates based on the reference Government security (G-sec) rate;
(ii) The reference
G-sec rate would be the average of the base yield of G-sec for
equivalent maturity reported by Fixed Income Money Market and Derivative
Association of India (FIMMDA) on a daily basis (working day) prevailing
for two weeks ending on Friday immediately preceding the filing of the
final prospectus with the Exchange or Registrar of Companies (ROC) in
case of public issue and the
issue opening date in case of private placement;
(iii) The ceiling
coupon rate for AA rated issuers shall be the reference G-sec. rate less
50 basis points in case of Retail Individual Investors (RII); and
reference G-sec rate less 100 basis points in case of other investor
segments, like Qualified Institutional Buyers (QIBs), Corporate and High
Net Worth Individuals (HNIs);
(iv) In case the rating
of the issuer entity is above AA, a reduction of 15 basis points shall
be made in the ceiling rate, as compared to the ceiling rate for AA
rated entities [as given in clause (iii)] ;
(v) These ceiling rates
shall apply for annual payment of interest and in case the schedule of
interest payments is altered to semi-annual, the interest rates shall be
reduced by 15 basis points;
(vi) The higher rate of
interest, applicable to retail investors, shall not be available in
case the bonds are transferred, except in case of transfer to legal heir
in the event of death of the original investor;
(e) Issue expense and brokerage.- (i)
In the case of private placement, the total issue expense shall not
exceed 0.2% of the issue size and in case of public issue it shall not
exceed 0.5% of the issue size;
(ii) The issue expense would include all expenses relating to the issue like brokerage, advertisement, printing, registration etc.;
(iii) The brokerage, in cases of different categories, shall be limited to the following ceilings :-
(I) QIB - 0.05%
(II) Corporates-0.1%
(III) HNI - 0.15%
(IV) RII - 0.75%;
(f) Public issue.- (i) At least 75% of the aggregate amount of bonds issued by each entity shall be raised through public issue;
(ii) 40% of such public issue shall be earmarked for retail investors;
(g) Private placement- (i)
While adopting the private placement route to issue the bonds, each
entity shall adopt the book building approach as per the Regulations 11
of the Securities and Exchange Board of India (Issue and Listing of Debt
Securities) Regulations, 2008, wherein bids shall be sought on the
coupon rate subject to a ceiling specified by the entity and the
allotment shall be made at the price bid;
(ii) The bonds shall be
paid for and issued at a premium but with a fixed coupon so that the
instrument can be traded under a single International Securities
Identification Number (ISIN) and the yield shall be worked based on the
price quoted and then allotment shall be done for best price (lowest
yield);
(iii) The ceiling rate of the interest shall either be equal to or lower than the rate mentioned in paragraph (d);
(iv) While calling for bids, there shall be no limit on the number of arrangers who can bid for the issue;
(v) The issue size shall be limited to rupees five hundred crores for each tranche;
(h) Repayment of bonds.- (i)
The issuer entity shall submit a financing plan to the Ministry of
Finance to demonstrate its ability to repay the borrowed funds once the
repayment becomes due;
(ii) This financing
plan shall be submitted to the Infra-Finance Section, Infrastructure and
Investment Division, Department of Economic Affairs, Ministry of
Finance, within three months of closure of the issue, duly supported by a
resolution of the respective entity's Board of Directors;
(i) Selection of merchant bankers.-
Merchant bankers shall be selected through competitive bidding process
wherein the only technical criteria for pre-qualification shall be the
total funds mobilised through public issue of debt and equity together
over the past five years and after pre-qualification, the final
selection shall be based on financial bids;
(j) The benefit under the aforesaid section
10 shall be admissible only if the holder of such bonds registers his,
her or it's name and the holding with the entity.
Table
| S. No. (1) | Entities (2) | Aggregate amount of bonds (3) |
| 1. | National Highways Authority of India | Rs. 10,000 crores |
| 2. | Indian Railway Finance Corporation Limited | Rs. 10,000 crores |
| 3. | India infrastructure Finance Company Limited | Rs. 10,000 crores |
| 4. | Housing and Urban Development Corporation Limited | Rs. 5,000 crores |
| 5. | National Housing Bank | Rs. 5,000 crores |
| 6. | Power Finance Corporation | Rs. 5,000 crores |
| 7. | Rural Electrical Corporation | Rs. 5,000 crores |
| 8. | Jawaharlal Nehru Port Trust | Rs. 2,000 crores |
| 9. | Dredging Corporation of India Limited | Rs. 500 crores |
| 10. | Ennore Port Limited | Rs. 1,000 crores |
Explanation.- For the purposes of this notification,-
(i) Qualified Institutional Buyers shall have
the same meaning as assigned to them in the Securities and Exchange
Board of India (Disclosure and Investor Protection) Guidelines, 2000.
(ii) Retail
Individual Investors means those individual investors, Hindu Undivided
Family (through Karta), and Non Resident Indians (NRIs), on repatriation
as well as non repatriation basis, applying for upto Rs. ten lakhs in
each issue ; and individual investors investing more than Rs. ten lakhs
shall be classified as High Net Worth Individuals.
(iii) The bonds
issued to NRIs shall be subject to the provisions of Notification No.
FEMA 4/2000-RB dated 3rd May, 2000 and Notification No. FEMA 20/2000-RB
dated 3rd May, 2000, issued under clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999, as amended from time to time.
(iv) The credit rating referred to in paragraph (d)
of this notification shall mean the credit rating, as assigned by a
credit rating agency which is approved by the Securities and Exchange
Board of India as well as the Reserve Bank of India and where an entity
has been rated differently, by more than one rating agency, the lower of
the two ratings shall be considered.
