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 INPUT TAX CREDIT IN VAT :: articles on VAT and GST in India :: form 3cd :: empanelment :: TAX RATES - GOODS TAXABLE @ 4% :: due date for vat payment :: cpt :: VAT RATES :: VAT Audit :: TDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company
 
 
News Headlines »
 Income tax returns (ITR) filing guide: 10 excellent tax-saving options other than Section 80C to save money
 TDS Rate Chart for AY 2018-19
 Last date to submit third installment of advance tax is December 15
 5 tax-saving funds that have given stellar returns in the past 5 years
 Find out which ITR Form is suitable for you
  Pr CIT vs. Baisetty Revathi (Andhra Pradesh High Court)
 What is income tax?
 Refund procedure initiated under GST
 Income tax returns (ITR) filing: How to get capital gains tax benefits on assets in own name
 7 avenues to help you save tax under Section 80C of Income Tax Act
 How to make income tax law less taxing

How SBI gained from tax-free bonds
March, 09th 2016

Tax-free bonds have been a blessing for the salaried rich this year as well as the State Bank of India, the country's largest lender.

The banking behemoth has so far invested about Rs 4,000 crore in tax-free bonds, which would help it offset losses in other securities due to mark-to-market valuations as yields have dipped about 15-20 basis points in the secondary market, pushing prices up, market sources told ET.

SBI chairman Arundhati Bhattacharya confirmed the matter saying the bank has invested around Rs 4,000 crore. "It is a prudent investment where (mark-to-market) gains can offset losses incurred in other securities...(under the same bracket),"she told ET.

The move should help cushion its investment book for March quarter earnings.

"Tax-free bonds are a reasonable bet for investors," said Vaibhav Agrawal, head of research at Angel Broking. "In SBI's large balance sheet, this may not have significant impact on the bank's profits, but it will help cushion losses incurred in other corporate bonds."

SBI invested the largest sum in the National Highways Authority of India's public issue. It applied for Rs 4,260 crore of bonds and was allotted Rs 1,231 crore.

The lender has invested a total of about Rs 2,400 crore in bonds sold by companies including NHAI and Housing and Urban Development Corporation, while National Bank for Agriculture & Rural Development sold close to Rs 1,500 crore to SBI in one-to-one deals (private placement).

The bonds have been accounted under "available for sale" and "held for trading" - two categories of a bank's investment book where it is mandated to show mark-to-market profits or losses. While unrealised profits cannot be shown, they can offset losses in other similar securities under the same category.

Between March and December, SBI provided Rs 155 crore for investment depreciation compared with a write-back of Rs 506 crore (reversal of such provisions) a year earlier, according to a presentation on the bank's website.

"Banks, as investors, have an additional advantage as of now," A Purushothaman, general manager at SBI, said in an ET article a few months ago. "As per the Fimmda valuation guidelines, tax-free bonds can be valued for MTM (mark-to-market) purposes as per the traded data of similar bonds."

Tax-free bond yields dipped to 7.13-7.14% in the secondary market from 7.30-7.32% a month ago.

If no traded data is available, the bond can be valued by grossing up the tax benefit in the coupon. As such securities are mostly not traded, the valuation gain as of now is an attractive benefit for banks.

By grossing up the tax benefit, the coupon could be treated at 13.08% for a tax-free bond offering 8.63% post-tax rate with 13-year residual maturity. The valuation of the bond reckoning a coupon of 13.08% would be Rs 135.35 compared with a Rs 100 face value, according to experts.

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

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