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IRFC tax issue resolved

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IRFC tax issue resolved
Giving a major relief to the Indian Railway Finance Corporation (IRFC), the dedicated market borrowing arm of the railways, the ministry of corporate affairs has exempted it from an accumulated deferred tax liability of Rs 63.92 billion.This will increase the company´s net worth and help IRFC raise additional debt of over Rs 630 billion, Indian Railways said in a statement issued on Tuesday.
It will also improve the valuation of the company for its maiden IPO. According to the government, post its exemption from the tax liability, IRFC will not require any equity infusion.IRFC faced a deferred tax liability as its depreciation was greater than its profit.
The company did not pay tax under normal assessment and is subject to a minimum alternate tax of 21 per cent.Besides, it had to make a provision for the deferred tax liability at 35 per cent. Thus the company´s books were bearing a total tax provision of 56 per cent. This will now come down to 21 per cent, leading to substantial gains in profit after tax, earnings per share and book value per share.
The Business Standard, New Delhi, 07th February 2018

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