RBI allows Indian corporate to issue offshore rupee-denominated bonds outside India
The Reserve Bank of India (RBI) has granted permission to the Indian corporate to issue offshore rupee-denominated bonds (Masala Bonds) outside India.
In this regard, Union Government has considered the matter of taxation of income from such bonds under Income Tax (IT) Act, 1961.
Such bonds will attract a withholding tax of 5 per cent and gains arising in case of appreciation of rupee against the foreign currency. In this case investment made would be exempted from capital gains tax.
Capital gains tax would be exempted for 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.
Government’s clarification on these bonds comes in the wake of companies such as NTPC, IRFC and IIFCL are planning to issue rupee-denominated bonds in markets abroad. Even foreign portfolio investors (FPIs) also had sought clarification on the tax treatment of the instruments.