PFC eyeing over 25% growth in funds from capital gain bonds this fiscal

New Delhi: State-run Power Finance Corporation Limited (PFC) is targeting higher fund flow from 54EC capital gain bonds in the last two-quarters of this fiscal and expects to register 25 percent growth in funds garnered from this instrument in 2020-21, a source said. The company had raised around Rs 1,100 crore from these bonds in 2019-20.

However, despite getting a good response in the last few years, the firm could not increase funding from this route in the first quarter of this fiscal mainly due to the COVID-19 impact. "PFC is expected to get good fund flow from 54EC bonds in the remaining part of this fiscal and achieve over 25 percent growth in this entire fiscal," the source said.

Under Section 54EC of the Income Tax Act, investors can invest up to Rs 50 lakh of long-term capital gains in these bonds. The investors get six months after the sale of any asset to invest in these 54EC bonds, also called long-term capital gain bonds. The investor gets tax benefit on long-term capital gains through investment in 54EC bonds, which are also secure in nature.  

PFC got permission to raise funds for 54EC bonds in July 2017. The company raised Rs 290 crore from these capital gain bonds in 2017-18, Rs 490 crore in 2018-19 and Rs 1,100 crore subsequently in 2019-20, showing a three-fold jump in three years. The total market size of long-term capital gain bonds was around Rs 12,000 crore in 2019-20.

There are four players in the long-term capital gain bonds market — PFC, REC, NHAI and IRFC.

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