At least three top-rated government-owned companies are set to raise $1.5-2 billion collectively in the weeks after Diwali by selling the first 'masala bonds' to overseas investors.Following a clarification about the tax burden on these debt instruments, NTPC, Power Finance Corporation (PFC) and Indian Railway Finance Corporation (IRFC) are preparing to tap the rupee-denominated offshore market by offering bonds to buyers, who are mostly not registered as foreign portfolio investors in India, three people familiar with the matter told ET.Rupee-denominated bonds help to reduce borrowing costs by at least 150-200 basis points compared with domestic fund-raising avenues because the exchange rate risk is shifted to the buyers. One basis point is 0.01 per centage point. NTPC or PFC may emerge as the first issuer of the new instrument, allowed by India a few months ago. NTPC, the country's largest electricity generator, will conduct roadshows in Singapore, London and other places beginning mid-November.NTPC and PFC may mop up between $500 million and $750 million each, while IRFC has indicated it will initially borrow about $300-500 million. "We have floated the RFP (request for proposal). Bids (from investment bankers) will be received by November 20," IRFC managing director Rajiv Datt told ET. "Based on market responses, we will finalise the issue size." An email sent to NTPC seeking details of the fund-raising remained unanswered.The finance ministry clarified a few weeks ago that interest income on masala bonds issued by Indian companies will attract a withholding tax of 5 per cent, easing apprehensions of a 20 per cent levy. The tax is usually deducted at source and is imposed on the interest income payable to entities outside the country."In the case of non-resident investors, it is clarified that withholding tax at the rate of 5 per cent which is in the nature of a final tax, would be applicable in the same way as it is applicable for offshore dollar-denominated bonds," the Central Board of Direct Taxes said in a release. The tax treatment of such bonds is now similar to external commercial borrowings and domestic corporate bonds.Any capital gains from foreign currency exchange rate fluctuations between the dates of issue and redemption will be exempt from tax. An issuer can raise up to $750 million a year under the automatic approval route. Cases beyond this limit will require prior approval of the Reserve Bank of ndia. The minimum tenor is five years. On October 27, India's argest housing finance company HDFC obtained in-principle approval from its board to sell $750 million worth of masala bonds.