The government needs to prepare a detailed policy to remove anomalies in the bond market and provide clarity in tax treatment for Indian corporates looking to raise debt, Securities and Exchange Board of India chairman UK Sinha said on Saturday.
“We believe we must have clarity in tax treatment. The tax treatment of various routes available to an Indian corporate is vastly different,” Sinha said on the sidelines of an event in New Delhi.
“All that we have asked the government is that try and reconcile it, because if you are looking at the long term and big money, especially for infrastructure companies, people will hesitate to invest as long as the anomalies exist. That is the point we are making,” Sinha said.
The finance ministry is already working on plans to bring about uniformity in withholding tax as part of its planned capital market reforms for FY15. Currently, companies raising ECBs are required to withhold tax at 5 per cent on the interest income of the overseas lender.
This in case of issuers of infrastructure and non-infrastructure bonds is 5 per cent and 20 per cent respectively. The proposal is to make the tax uniform at 5 per cent for all the three categories.