No TDS on Masala Bonds
Masala Bonds are the bonds that are issued outside India to raise money from the overseas market in Indian Rupees and not in any other foreign currency. Fluctuations in currency are the risk of the investor and not of the issuer company.
The two exchanges ie. National Stock Exchange of India (NSE) & London Stock Exchange Group (LSEG) have signed a memorandum of understanding (MoU) on Friday 21st September 2018 to collaborate for dual listing for masala bonds as well as foreign currency bonds issued by Indian Company in the overseas market.
The Government decides to withdraw withholding tax on Masala bonds to contain Rupee Fall
Earlier, as per section 194LC of the Income-tax Act, 1961, the Interest payable in respect of Masala Bonds issued before the 1st of July, 2020 required deduction of withholding tax at the concessional rate of 5%.
However on Sep 17th, 2018, The Government has waived the withholding tax deduction requirement for interest payable during the period from Sep 17th, 2018 to Mar 31st, 2019 to incentivize the Masala Bonds to increase foreign exchange inflow and contain the current account deficit.
Masala Bonds Issuers Examples
Housing Development Finance Corporation Ltd. (HDFC) was the first corporate in India to issue Rupee Denominated Bonds in July 2016. Some of the other issuers include NTPC, DHFL, IREDA, NHAI, IFHL, etc.
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