The Budget for 2013-14 is likely to announce a slew of steps to boost private and foreign investment, especially in the infrastructure sector, along with income tax breaks for spurring savings to lift economic growth.

Some of the steps that are being considered include restoration of tax breaks for infrastructure bonds, waiver of withholding tax on the interest on foreign loans to mega projects, raising FII debt investment limits and re-energising the corporate bond market.

Sources said there is a strong case for restoration of the tax break of up to R20,000 for infrastructure bonds under Section 80CCF. The incentive was abolished in the last Budget even though the government allowed infrastructure financiers to float tax-free bonds totalling R60,000 crore during 2012-13. The retail participation in these bonds have been lacklustre this year due to the absence of the tax deduction.

There is a chance of exempting interest income from loans given to mega projects like the Delhi-Mumbai Industrial Corridor (DMIC) and Dedicated Freight Corridor (DFC), and infrastructure debt funds from the 5% withholding tax, sources said.

Considering that government’s gross market borrowing may near an all-time high of R6 lakh crore in 2013-14 and the clamour for long-term funds from private sector, the foreign investment limits in government, corporate and infrastructure bonds could be raised by $5-10 billion each in the next fiscal.

The budget may also announce setting up of a bond guarantee fund, which will help in credit enhancement of companies engaged in public-private partnership (PPP) projects in the infrastructure space.