INDIA BUSINESS WORLD - JANUARY 1^st - JANUARY 15^th - 2008

HUDCO MAY FLOAT TAX-FREE BONDS

You may soon be able to get another tax-free option to park your capital gains. The government is likely to allow Hudco to float capital gains exemption bonds on the lines of National Housing Board (NHB), Rural Electrification Corp (REC), Nabard and NHAI. The ministry of urban housing proposal is with the finance ministry and an announcement is expected in Budget 2008.

The conditions to park capital gains arising out of sale of asset will remain the same. This means no individual investor or corporate investor will be allowed to park capital gains of over Rs 50 lakh in such bonds. To ensure the bonds are not cornered by large investors or corporates, the finance ministry, in 2006, had put a limit of Rs 50 lakh per investor per year with respect to capital gains bonds issued by NHAI and REC under Section 54EC of the Income-Tax Act.

"Capital gains bonds under Section 54EC have been allowed to NHB, REC, Nabard and NHAI. Hudco has not been included till now. Since Hudco is the only agency that earmarks 55% of its funds for housing for the lower income group, it is suggested the concession be made available to Hudco to enable it to access funds at a cheaper rate," a source said. The money thus generated would be pumped into development of housing infrastructure, especially for low-cost housing. National Housing & Habitat Policy that was cleared by the Cabinet in November has also made a recommendation in this regard.

Experts said the move would benefit not just investors by giving them another avenue to park capital gains but also help Hudco raise long-term funds it needs. Experience with REC and NHAI has shown that the PSUs have been able to raise over Rs 10,000 crore per year to be invested in road and power infrastructure. Hudco provides long-term finance for construction of houses. It also undertakes housing and urban development programmes. Hudco promotes, establishes, assists, collaborates and provides consultancy services for the projects of designing and planning of works relating to housing and urban development programmes in the country and abroad.