Rupee-dominated bonds, commonly called Masala bonds, are becoming more succulent for both issuers and investors, and countries like India maintain an upright position with Masala bonds. As a result, to ease the affair, on Thursday, the government of India exempted the tax payable on the interest of offshore rupee bonds.
The Central Board of Direct Taxes (CBDT), on its statement, said that the Non-resident and foreign companies are not liable to pay the tax on interest of offshore rupee bonds, this will be implemented on every bond issued on and after 17th September 2018 and before 31st March 2019, added the zenith direct tax body.
“It has been decided that capital gains, arising in the 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, would be exempted from capital gains tax,” the Central Board of Direct Taxes.
The advancing depreciation of rupee has incapacitated industries by high quantities of imported raw materials also, the sudden rise in the domestic price of auto fuel has aggravated the economic problems.
The reform of the taxation will induce investors, uplift the capital inflow, and equip the rupee. The increase in foreign currency borrowing can be a substantial mean of elevating domestic currency funding and eliminate many emerging market economies risks. Arun Jaitley had announced “a multi-pronged strategy to contain the current account deficit (CAD) and augment the foreign exchange inflow says CBDT.
While assessing the economic plight last week, Prime minister Narendra Modi and CBDT came up with a reforming taxation policy and expects a capital gain on rupee-denominated bonds, advocate rupee and encourage a capital inflow in the country with the same.