January 22, 2021
File photo - REUTERS/ FRANCIS MASCARENHAS×
The Centre is looking at introducing an instrument such as a tax-free bond during the Budget to mobilise resources for higher health-related expenses due to Covid-19.
According to multiple government sources, the exact name and nature of the instrument are yet to be finalised, but the aim is to strike a balance between financing additional expenditure and not adding to the tax burden. A formal announcement is expected in the Budget, on February 1.
The government may need to provide ₹50,000-80,000 crore for Covid vaccination during FY22. While introducing a cess or a surcharge would address this, State governments have been objecting to such a levy as they do not get a share of this revenue stream. Hence, a tax-free bond may seem a more viable option to the Centre.
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