DRs with voting rights to be taxed like equity

Depository Receipts are likely to be treated as equity for the purpose of taxation if such securities entail voting rights.

These changes, according to officials, are to be announced in the Budget as part of the exercise to encourage domestic companies to raise funds from overseas markets.

"The recommendations of the Sahoo committee has been accepted in total and tax related amendments would be made in Budget in the I-T Act," a Finance Ministry official told PTI.

The tax treatment of DRs should be similar to that of underlying securities, the official added.

Another official said that the conversion of a DR into the underlying securities and vice versa would not be taxable events.

"The trading of DRs outside India should not attract any tax in India," the official added.

Depository Receipts are used by companies to raise capital from overseas investors.

The Sahoo Committee was set up in September last year to review of rules governing foreign currency convertible bonds (FCCBs) and DRs.

The Committee has recommended that the DRs should be counted as "public shareholding if they have attached voting rights for the holders".

It has also suggested that companies (listed or unlisted) should be allowed to issue DRs against any underlying securities, which may be equity or debt.

It further said that DRs can be issued for raising funds by issuing new shares or against the existing equity.

The Committee was set up under ICSI Secretary and former Sebi member M S Sahoo to review the decade-old Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • Banks might be bracing for intense rate war for retail loans

    While select small banks have been slashing their deposit rates by five to 10 basis points over the past few weeks for short term adjustments to avoid

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Varun Dutt

<b>Riskfactor</b>: Intertemporal choices

Intertemporal choice is the study of the relative value people ...

Parvez Imam

Why we all have blood on our hands

What does the Jammu and Kashmir flood make us think? ...

Dharmendra Khandal

The peculiar possibilities of animal poop

You can tell a lot about an animal by its ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture