Latest Expert Exchange Queries
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) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: TAX RATES - GOODS TAXABLE @ 4% :: VAT Audit :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: form 3cd :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: TDS :: list of goods taxed at 4% :: due date for vat payment :: VAT RATES :: empanelment :: articles on VAT and GST in India
 
 
General »
 Top House tax writer suggests measures to mitigate the impact of the border tax
 Consumer goods distributors, wholesalers to bear the brunt of GST
 GST classification woes to continue
 There will be no tax on farm or agriculture income
 RBI, Income Tax Acts to be amended for electoral bonds, Jaitley says
  Clarifications on the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016
 I-T zeroes in on Mumbai trader in first crackdown after demonetisation
  Tax queries answered by Dilip Lakhani, Senior Chartered Accountant
 Income Tax Department Failed To Unearth Black Money Despite Information
 Govt filing twice as many cases as private cos in Supreme Court
 Taxes under GST 'to increase a bit', says CBEC Chairman

Govt clarifies provision for corporate investments in tax-free bonds
March, 15th 2013

The government today clarified that tax-free bonds are eligible investments for companies in a bid to boost corporate participation in such instruments.

The government's move comes after ambiguity over interpretation of a provision in the Companies Act relating to inter-corporate deposits affected investments by corporate bodies in tax-free bond issuances. "It's hereby clarified that in cases where the effective yield on tax-free bonds is greater than the yield on prevailing bank rate, there is no violation of the Section 372A(3) of Companies Act, 1956," the ministry of corporate affairs said in a circular.

The Section 372A(3) of the Companies Act says: "No loan to any corporate body shall be made at a rate of interest lower than the prevailing bank rate, being the standard rate made public under section 49 of the Reserve Bank of India Act, 1934." Currently, the bank rate is at 8.75 per cent, while the coupon rate offered by such instruments are in the range between 6.85 per cent and 7.2 per cent. As a result, most companies were staying away from investing in such instruments for fear of breaching the Company Act provision.

The bank rate was untouched at six per cent since 2003. Last month, RBI as a "one-time technical adjustment" decided to align the bank rate with the so-called marginal standing facility (MSF), from where banks can borrow overnight, effective February 13. As a result, the bank rate shot up from six per cent to 9.5 per cent. Currently, both MSF and the bank rate are at 8.75 per cent.

The six tax-free bond issues currently in the market are finding it challenging to garner subscription. The corporate affairs ministry in a statement attributed the tepid response to restriction under Section 372A(3). Next year, the government has allowed fund-raising to the tune of Rs 50,000 crore through tax-free bond issuances. Lack of clarity would have impacted investments of up to Rs 5,000 crore, as up to 10 per cent of bond public issues are reserved for corporate subscribers.

In addition, some issuers had planned to raise funds through private placement for big-ticket corporate and institutional investors. "This clarification puts to rest the ambiguity on eligibility of investments by corporate bodies in tax-free bonds currently on offer," said the ministry in a statement.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Sitemap

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