India's NBFC body seeks long-term tax benefits on market-linked debentures
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The representative body of India's non-banking finance companies (NBFCs), on Wednesday, asked the federal government to give debt products, including market-linked debentures (MLDs), the benefits of long-term capital gains, similar to equities.
The Finance Industry Development Council (FIDC), in a letter to Finance Minister Nirmala Sitharaman, recommended that MLDs and debt mutual funds should get the tax benefit if a listed instrument is held for more than one year.
While traditional debt instruments have a fixed coupon rate, MLDs are structured products where returns are linked to a market-traded instruments — a hybrid nature that allows them to enjoy a lower tax rate than regular debt products.
However, Sitharaman, in her federal budget presentation earlier this month, said the returns from listed MLDs will be taxed as short-term capital gains, instead of long-term – a move that could push taxes to as high as 30%, from 10% now.
"If the same is not feasible and the parity of tax between equity instruments and MLDs is removed, our humble submission is to apply the provisions prospectively on new investments," FIDC said in the letter.
(Reporting by Siddhi Nayak; Editing by Savio D'Souza)
