Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: articles on VAT and GST in India :: VAT RATES :: empanelment :: TDS :: cpt :: ACCOUNTING STANDARD :: VAT Audit :: form 3cd :: TAX RATES - GOODS TAXABLE @ 4% :: list of goods taxed at 4% :: due date for vat payment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: Central Excise rule to resale the machines to a new company
 
 
« General »
 Govt sets up task force to review income tax laws
 Tax queries: Contact employer to get Form 16 error rectified
 Finance Ministry may hike monetary limit for filing tax appeals
 Compilation of all notifications issued ON
 Banking transaction tax to have cascading effect: NIPFP
 While filing tax in India, NRIs do not have to state overseas income
 Tax ease on cards, some daily use items may become cheaper
 It’s one year of GSTN, too
 SBI home, auto loan interest rates cut, set to be effective from Nov 1
 MNCs will have to furnish extra disclosures from March 2018
 High Court Allows Woman To File Income Tax Returns Without Quoting Aadhaar

Sovereign wealth funds shun Indian tax-free bonds
December, 23rd 2013

Sovereign wealth funds have shunned tax-free bonds issued by state-run Indian companies and financial institutions despite the government’s attempts to woo these foreign funds in the numerous overseas road shows by finance minister P. Chidambaram.

A volatile rupee, the lack of any specific tax advantage and unattractive interest rates have ensured that not even one issue has been subscribed by these wealth funds, according to officials from these financial institutions and merchant bankers.

The entities were Indian Railway Finance Corp. Ltd (IRFC), India Infrastructure Finance Co. Ltd (IIFCL), the National Highways Authority of India (NHAI), Power Finance Corp. Ltd (PFC), Rural Electrification Corp. Ltd, Housing and Urban Development Corp. Ltd and National Housing Bank.

A sovereign wealth fund is a state-owned investment fund that invests in various financial instruments across the world. India has been wooing sovereign wealth funds based in West Asia and other countries as part of its plan to counter foreign outflows due to a tapering of the bond-buying programme by the US Federal Reserve.

In one of these steps, the Central Board of Direct Taxes in August allowed 13 entities to raise up to Rs.48,000 crore through tax-free bonds. For the first time, a clause was inserted that these institutions had to set aside a portion from the issuances for sovereign wealth funds.

But later, institutions that had been allowed to raise less than Rs.1,000 crore were exempted from this clause after these institutions told the government that these issues are too small.

Tax-free bonds are long term in nature and their proceeds are invested in infrastructure. In a tax-free bond, the interest income is exempted from income tax, which is an advantage for domestic investors but not for overseas investors who may have to pay tax in their countries, depending on the laws there.

“We had approached sovereign wealth funds through our merchant banker. But no one showed interest,” said an official with IIFCL. “There are no tax advantages for foreign investors despite the lower withholding tax rate of 5%. Domestic investors at least get tax advantages.”

“It is the same story for everyone (all other companies that are raising bonds),” he said, requesting anonymity.

The government even reduced the rate of tax on interest paid to overseas investors who invest in such bonds to 5% from 20%.
Officials from IRFC, NHAI and PFC confirmed that they did not receive any foreign fund participation. None were willing to be named. Emails sent to the other financial institutions on 19 December remained unanswered.

“The coupon rate of 8-9% offered by these bonds is not attractive enough for these investors,” said an NHAI official.

Compared with other investment options in India, tax-free bonds may not be very attractive for foreign funds, said Jyoti Prakash Gadia, managing director of Resurgent India Ltd, an investment bank.

“Compared to stocks or other bonds, price appreciation of tax-free bonds may not be much if an investor is looking to sell,” Gadia said.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Quality Assurance Services Testing and Re-testing

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions