Procedure for setting up an Infrastructure Debt Fund for purpose of exemption under Schedule VII [Table: Sl. No. 46] to Act

Income-tax Rules, 2026

Tax2026335 rules

Statutory text

Procedure for setting up an Infrastructure Debt Fund for purpose of exemption under Schedule VII [Table: Sl. No. 46] to Act.

288. (1) Every Infrastructure Debt Fund under this rule shall be set up as a Non-Banking Financial Company conforming to and satisfying the conditions laid down in the regulatory framework provided by the Reserve Bank of India.

(2) The funds of the Infrastructure Debt Fund shall be invested only in—

(a) post commencement operation date infrastructure projects, which have completed at least one year of satisfactory commercial operations; or

(b) toll-operate-transfer projects as the direct lender.

(3) The Infrastructure Debt Fund shall raise the funds in the manner specified in column B of the following Table subject to the conditions mentioned in column C thereof:

TABLE

Sl. No. Conditions

A C

1. (a) Such bonds must be in accordance with the directions of Reserve Bank of India and the relevant regulations under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 made under the Foreign Exchange Management Act, 1999 (42 of 1999); and (b) in case of an investor in the said bond being a non-resident, the original or initial maturity of bond, at time of first investment by such non-resident investor, shall not be less than a period of five years.

(a) Such bonds must be in accordance with the directions of Reserve Bank of India and the relevant regulations under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 made under the Foreign Exchange Management Act, 1999 (42 of 1999); and

(b) in case of an investor in the said bond being a non-resident, the original or initial maturity of bond, at time of first investment by such non-resident investor, shall not be less than a period of five years.

2. (a) Such bonds shall be in accordance with rule 7; and (b) as mentioned in clause (b) column C of Sl. No. 1.

(a) Such bonds shall be in accordance with rule 7; and

(b) as mentioned in clause (b) column C of Sl. No. 1.

3. (a) Such external commercial borrowings shall be in accordance with the directions of the Foreign Exchange Department of the Reserve Bank of India; and (b) the tenor shall not be less than a period of five years and such borrowings shall not be sourced from foreign branches of Indian banks.

(a) Such external commercial borrowings shall be in accordance with the directions of the Foreign Exchange Department of the Reserve Bank of India; and

(b) the tenor shall not be less than a period of five years and such borrowings shall not be sourced from foreign branches of Indian banks.

Issue rupee denominated bonds or foreign currency bonds.

Issue zero coupon bonds.

(a) Such bonds shall be in accordance with rule 7; and

(b) as mentioned in clause (b) column C of Sl. No. 1.

Raise funds through loan route under external commercial borrowings.

(a) Such external commercial borrowings shall be in accordance with the directions of the Foreign Exchange Department of the Reserve Bank of India; and

(b) the tenor shall not be less than a period of five years and such borrowings shall not be sourced from foreign branches of Indian banks.

(4) The investment made by the Infrastructure Debt Fund in an individual project or project belonging to a group at any time, shall not exceed 20% of the corpus of the fund.

(5) No investment shall be made by the Infrastructure Debt Fund in any project where its specified shareholder or the associated enterprise or the group of such specified shareholder has a substantial interest.

(6) The Infrastructure Debt Fund shall file its return of income as required by section 263(1)(a) on or before the due date specified in section 263(1)(c).

(7) In case the Infrastructure Debt Fund does not fulfil any of the conditions provided in this rule or directions of the Reserve Bank of India, all provisions of the Act shall apply as if it is not an Infrastructure Debt Fund referred to in Schedule VII [Table: Sl. No. 46] to the Act.

(8) In this rule, —

(a) "associated enterprise" shall have the meaning assigned to it in section 162;

(b) "concern" shall have the meaning assigned to it in section 2(40);

(d) "group" means a group as defined in section 2(mm) of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(e) a person shall be deemed to have substantial interest in —

(i) a company, if he is the beneficial owner (including beneficial ownership held by one or more of his relatives, in case the person is an individual) of shares (not being the shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than 10% of the voting power; or

(ii) a concern other than a company if he is, at any time during the tax year, beneficially entitled to not less than 20% of the income of such concern;

(f) "relative", in relation to an individual, means—

(i) spouse of the individual; or

(ii) brother or sister of the individual; or

(iii) brother or sister of the spouse of the individual; or

(iv) brother or sister of either of the parents of the individual; or

(v) any lineal ascendant or descendant of the individual; or

(vi) any lineal ascendant or descendant of the spouse of the individual; or

(vii) spouse of the persons referred to in sub-clauses (ii) to (vi); or

(viii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual; and

(g) "specified shareholder" means a non-banking financial company, or a bank, or any other person holding, directly or indirectly, shares carrying not less than 30% of the voting power in Infrastructure Debt Fund.

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