TAX-FREE BONDS FOR HOUSING, SMES MOOTED

Ahead of the budget, refinance institutions National Housing Bank, National Bank for Agriculture & Rural Development (Nabard) and Small Industries Development Bank of India (Sidbi) are seeking a nod to issue tax-free bonds, besides being allowed to raise long-term deposits and external debt.The move, which follows a discussion with the finance ministry a couple of months ago, is part of a strategy being mooted by the three institutions to meet the growing capital needs of the small scale sector, farming and housing. The three entities were earlier allowed to mop up funds through tax-free bonds — including those meant to help individuals avoid capital gains from sale of property — but are increasingly finding it tough to raise resources at the scale they need."Among the options being considered are 54EC (capital gains exempt bonds) but there is nothing final about the proposals," said a source. While short-term deposits are ruled out, a mechanism for term deposits is also being discussed, an official said."The idea is to look at a collective effort to raise low-cost resources, which focusses on various options and alternatives to capital gains (exempt) bonds," said an official.Over the last few yearsFM P Chidambaram has tightened the issue of capital gains exempt bonds, with an overall ceiling on the amount that can be parked in this instrument, targeted mainly at individuals. Besides, only National Highways Authority of India and Rural Electrification Corporation are entitled to issue these bonds – www.timesofIndia.com