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of <h1>Ministry Clarifies Section 372A(3): Tax-Free Bonds Compliant If Yield Exceeds Bank Rate.</h1> The circular issued by the Ministry of Corporate Affairs clarifies the application of Section 372A(3) of the Companies Act, 1956, concerning tax-free bonds. The Budget 2013-14 authorized the issuance of Rs. 50,000 crores in tax-free bonds with interest rates between 6.75% and 7.50%. The circular addresses concerns that these bonds might violate Section 372A(3), which prohibits loans at rates lower than the prevailing bank rate. It clarifies that if the effective yield on these bonds exceeds the bank rate yield, there is no violation. The circular is effective immediately upon issuance.
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