Skip to main content

Clarity on tax treatment of offshore Rs.bonds

Offshore rupee- denominated bonds will attract a withholding tax of five per cent, and gains arising in case of appreciation of rupee against the foreign currency in which the investment is made would be exempted from capital gains tax, the finance ministry clarified on Thursday.
The clarification comes in the wake of companies such as NTPC, IIFCL, and IRFC planning to issue rupeedenominated bonds in markets abroad, and after foreign portfolio investors had sought clarification on the tax treatment of the instruments, dubbed masala bonds, in a meeting with finance ministry officials last week.
In the statement, the Central Board of Direct Taxes (CBDT) said the matter of taxation of income from such bonds under Income Tax Act, 1961 had been considered by the government.
“As far as taxation of interest income from off- shore bonds in the case of non- resident investors is concerned, it is clarified that withholding tax at the rate of five per cent, which is in the nature of final tax, would be applicable in the same way as it is applicable for off- shore dollar denominated bonds,” it said.
“Further, it has been decided that the capital gains, arising in case of appreciation of rupee between the date of Issue and the date of redemption against the foreign currency in which the investment is made, would be exempted from capital gains tax,” the statement said, adding that legislative amendments in this regard would be proposed through the finance Bill, 2016.
“What this move does is clear the confusion regarding masala bonds. This will help in putting the tax treatment of offshore rupee bonds on par with onshore bonds,” said Ajay Manglunia, senior vicepresident (fixed income), Edelweiss Securities.
“With the clarity on taxation matters, we should see movement from number of Indian companies, which were planning to issue rupeelinked bonds abroad but were awaiting tax clarification.
There are a lot of foreign institutional investors, which are not registered as FPIs in India. Issuing of the bonds by Indian companies will enable such FIIs to gain exposure to the currency,” Manglunia added.
NTPC, the country’s largest power producer, had said earlier this year that it plans to issue $ 1 billion worth of global rupeedenominated bonds to install additional power generation and other capital spending. IIFCL plans to issue $ 500 million worth of masala bonds, while IRFC also plans to issue such bonds of an unknown quantum.
Business Standard, New Delhi, 30th Oct. 2015

Comments

Popular posts from this blog

Credit card spending growth declines on RBI gaze, stress build-up

  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the...

SFBs should be vigilant, proactive to mitigate risks: RBI deputy guv

  The Reserve Bank of India’s Deputy Governor Swaminathan J on Friday instructed the directors of small finance banks (SFBs) to be vigilant and proactive in identifying emerging risks in the sector.Speaking at a conference for directors on the boards of SFBs, Swaminathan highlighted the role of governance in guiding SFBs towards sustainable growth with stability. He also emphasised the importance of sustainable business models.Additionally, he highlighted the need for strengthening cybersecurity to protect the entities against digital threats and urged for a stronger focus on financial inclusion, customer service, and grievance redressal to ensure a broader reach of banking services.Executive Directors S C Murmu, Rohit Jain, and R L K Rao, along with other senior officials representing the Supervision, Regulation, and Enforcement Departments of the RBI, also participated in the conference.   -  Business Standard  30 th  September, 2024

Brigade Hotel Ventures files draft papers with Sebi for Rs 900 crore IPO

  Brigade Hotel Ventures Ltd, owner and developer of hotels in South India, has filed draft papers with capital markets regulator Sebi to raise Rs 900 crore through an initial public offering (IPO).The proposed IPO is entirely a fresh issue of equity shares with no Offer-for-Sale (OFS) component, according to the draft red herring prospectus (DRHP).Proceeds from the issue to the tune of Rs 481 crore will go towards payment of debt, Rs 412 crore will be allocated to the company and Rs 69 crore to its material subsidiary, SRP Prosperita Hotel Ventures Ltd.Additionally, Rs 107.52 crore will be used to purchase an undivided share of land from the Promoter, BEL, and the remaining funds will support acquisitions, other strategic initiatives, and general corporate purposes.The company may raise up to Rs 180 crore through a Pre-IPO Placement.   If the placement is undertaken, the issue size will be reduced.Brigade Hotel Ventures Ltd is a wholly-owned subsidiary of Brigade Enterprises ...