New Delhi: Banks want the Union Finance Ministry to restore the tax exemption on income from investment in infrastructure projects, saying that removal of this exemption would discourage investments in these projects.

In Budget 2006-07, the Government had made changes in its income-tax law to make income from all existing, as well as future investments in eligible infrastructure-related businesses taxable for which the Government decided to omit the popular Section 10 (23G) from the income tax law. This change is to come into effect from April 1, 2007 and applicable for assessment year 2007-08.

The provision exempted specified income by way of dividend, interest and long term capital gains of infrastructure capital funds or infrastructure capital companies from investments in shares and long-term finance to an enterprise wholly engaged in infrastructure business, housing, hotels or hospital industry.

The Indian Banks' Association (IBA) has submitted to the Government that at least the existing investments should continue to get tax benefit under this provision even if the exemption cannot be re-introduced.