NEW DELHI: The forthcoming budget may give some tax incentives to entities engaged in environment-friendly green projects, sources told TNIE.
As per a source, the Central Board of Direct Taxes (CBDT) has agreed to the industry demand for such incentives given critical importance of carbon-neutral projects.
The government may also agree to industry suggestions that interest income earned by subscribers of green bonds be exempted or be subjected to a concessional rate of tax. India has set a target of reducing carbon intensity below 45% and reaching a non-fossil fuel energy capacity of 500 GW by 2030. It has set the target of fulfilling at least half of its energy requirements via renewable energy by 2030 and reducing carbon dioxide emissions by 1 billion tonne by 2030. By 2070, India wants to achieve net-zero emission target.
Finance minister Nirmala Sitharaman will present the Union Budget on July 23. The budget is likely to announce several measures to help India achieve its medium and long-term carbon emission goals.
In the interim Budget speech in February, Sitharaman had announced several measures for promoting green energy. A viability gap funding was announced for harnessing offshore wind energy potential for initial capacity of one giga-watt. She had announced setting up coal gasification and liquefaction capacity of 100 MT by 2030. Apart from that, the budget had announced phased mandatory blending of compressed biogas (CBG) in compressed natural gas (CNG) for transport and piped natural gas (PNG) for domestic purposes.
The government has planned to raise `12,000 crore via sovereign green bonds in the first half of the current financial year. However, it had to cancel the auction of the bonds as the market was asking for higher yields than the government or the RBI was ready to offer. Tax incentives on green bonds can help increase demand for green bonds, which are used for financing low carbon-emitting projects. The industry expects the government to announce some initiatives that would further the cause of climate finance in the country.
Vivek Iyer, partner, Grant Thornton Bharat, says: “While initiatives around green deposit and green lending have been underway, it would be important for the government to focus on transition finance, which is the key requirement to move away from traditional carbon-intensive energy frameworks to low carbon footprint frameworks,” he says.