"We are considering some tax incentives for the corporate bonds. This is necessary to help corporates and financial institutions raise long-term funds for infrastructure projects," a senior official told PTI.
The Ministry, he added, is in touch with the Reserve Bank and market regulator Sebi in this regard.
The incentives are primarily meant for attracting retail and high-net worth (HNI) investors towards this segment and are aimed at helping India Inc raise long-term funds in a cost-effective manner.
Chidambaram had earlier said the government was considering a number of measures to energise and deepen the corporate bond market.
Providing incentives to investors in the corporate bond market will boost this sagging segment affected by poor industrial growth in the recent past.
Though India has a very advanced G-sec (government securities) market, corporate bond market is relatively under-developed.
However, for attracting individual investors, corporate bonds should be made a more lucrative investment than bank fixed deposits, according to the official.
The proposal to incentivise the corporate bond market was also discussed in the meeting of the Financial Stability and Development Council (FSDC) held last month, he said.
The high-level FSDC, which is chaired by the Finance Minister and comprises heads of RBI, Sebi, IRDA and PFRDA, coordinates the working of regulators and looks at economic and financial issues.
Corporate bonds are debt securities issued by private and public corporations. Companies issue corporate bonds to raise money for a variety of purposes, such as building a new plant, purchasing equipment, or growing the business.