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Taxation of Debt Instruments

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Investing in a debt instrument is similar to giving a loan to the issuing entity in a manner wherein each holders’ component is separable from the others and also marketable in accordance with the terms of the issuance. The basic reason behind investing in a debt instrument is to earn interest income and capital appreciation. The issuer pre-decides the interest rate you will earn as well as maturity period. That’s why they are also called ‘fixed-income’ securities because you know what you’re going to get out of them. Pooled vehicles or funds that invest in debt instruments are also known as debt funds. A debt fund invests in fixed-interest generating securities like corporate bonds, government securities, treasury bills, commercial paper and other money market instruments.

 

Some of the important and widely used debt instruments are Non-Convertible Debentures, Zero Coupon Bonds, Redeemable Preference Shares, Deep Discount Bonds, Units of Debt Oriented Mutual Funds, Units of Real Estate Investment Trusts, Units of Infrastructure Investment Trusts, etc.

A. Tax treatment of Debt Instruments– from Issuer’s perspective
As per the provisions of the Income Tax Act, 1961 (‘ITA’), under Section 36(1)(iii) – amounts paid as interest on borrowings and debt, in general, qualify for tax deduction as long as it is on account of capital borrowed for the purpose of a business or profession.

 

Further, section 37 of the ITA provides that any expenditure (not being capital or personal in nature), incurred wholly and exclusively for the purposes of the business, would qualify as an allowable expenditure to be taken into account while computing taxable business or professional income.

 

The issuer of a debt instrument would need to consider appropriate tax withholding at source (‘WHT’) on interest payments to claim interest as a tax-deductible expense. Failure to deduct WHT could result
in tax, interest and penal consequences.

a. Meaning of “debt” and “interest” under the ITA
ITA does not specifically define the terms “debt” or “loan”. In the ordinary sense, it means something that is owed and creates an obligation to pay, generally money or money’s worth. In terms of financing, it connotes a temporary provision of money usually with interest payable on the amount. For a loan there has to be a positive act of lending money coupled with its acceptance and a corresponding obligation of repayment. Therefore, equity contributions without any provision of repayment cannot be classified as a loan.

 

The term “interest”, however, has been defined under Section 2(28A) in the ITA to mean:

 

“interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized”

 

The above definition is inclusive in nature and does not provide specific guidance as to the essential attributes of “debt” or “interest”. Judicial authorities have interpreted the above-mentioned terms in a CEPT v. Bhartia Electric Steel Co. Ltd (1954) 25 ITR 192 (Cal.). broad fashion and have held interest to include any amount payable as compensation towards any debt incurred, money borrowed, deposit, claim or any other similar right or obligation. However, for purposes of tax deduction, interest needs to be distinguished from payments which are in the form of application of profits, since deduction is only permissible with respect to interest on borrowings. In this context “interest” is understood as an outgoing expenditure that is taken into account to arrive at the taxable profit as compared to any payment which is an application of profit (which would not qualify as a deductible expenditure).

 

The issaunce of preference shares is generally not considered a loan, even if it has been issued on a redeemable basis. Hence, payment of interest\dividend on redeemable on such preference shares is not deductible as interest on borrowed capital under normal taxation provisions of ITA. It is worthwhile to note that under the provisions of IND-AS redeemable preference shares are classified as liability and accordingly payment due thereon as finance expenses.

b. Certain issues in deductibility of interest payments
The ITA provides for a residual clause in Section 37, under which any expenditure incurred wholly and exclusively for the purposes of a business, not being capital in nature, can be allowed as a tax deductible expense. Accordingly, claims of deduction for interest expenditure on items like trade payables, brokerage or commission paid to an agent to procure a loan have been allowed under this residuary clause. However, Interest paid on borrowings made for the purpose of paying statutory dues has been held to be not eligible for tax deduction.3

 

Further, as per the provisions of the ITA, a deduction of interest on borrowings is allowable only if it is paid or incurred on account of capital borrowed for business purposes. The interpretation of “business purpose” is largely a question of fact whereby the borrowed funds should be utilized for the purposes of the existing business and not a new project or independent venture which is unconnected with the business. In order to be allowable as a tax deduction, interest should be paid in respect of a business which is already set up and running. Further, the Indian courts have held that in cases where an entity has borrowed money on interest and subsequently advanced interest free loans to its sister concerns, that interest expenditure on such borrowing cannot be said to be for business purposes and is hence disallowable.6

 

In situations where money has been borrowed from –

 

(a) a related party, as defined under the ITA, or
(b) enterprises which for the purposes of transfer pricing are associated enterprises,

 

the amount of interest eligible for tax deduction is computed (a) to ensure that the amount is not excessive and unreasonable and (b) on an arm’s length basis.7

 

The judicial trend, has been to ascertain the reasonableness of the expenditure having regard to first, the fair market value of the goods, services or facilities for which the payment is made,8 secondly, the legitimate needs of the business or profession, and lastly, the benefit derived by or accruing to the taxpayer from the expenditure.9 Furthermore, a duty is cast on the Revenue Authorities to establish that the payment is excessive or unreasonable; evidence for this has to be placed on record and the disallowance cannot proceed merely on the basis of surmises and conjectures.

 

Further, deduction for expense incurred in relation to convertible instruments has been the subject matter of conflicting judicial opinion. In the case of Banco Products (India) Ltd v. CIT10 it was observed that since convertible debentures have the characteristics of equity shares, the convertible portion of such debentures cannot be termed as debt and, therefore, any expenditure to enhance the equity base of the company has to be treated as capital expenditure. However, a contrary view was taken in CIT v. Secure Meters Ltd11 in which case it was held that debentures issued are loans and, thus, that expenditure incurred in issuing and raising loans by debentures is admissible, notwithstanding the fact that they are convertible or non-convertible.

 

If interest payments are made contingent on earning profits or on the value of publicly traded property or the value of a stock or commodities index, a question may arise whether the amount paid by way of interest is tax deductible. Such loan/interest arrangements are not widely prevalent in India and the ITA does not provide any separate provisions for the deduction of interest in such situations and
such issues remain largely untested by the Revenue Authorities.

B. Tax treatment of Debt – from investor’s perspective
With respect to the income earned by subscribing or holding to a debt instrument, is normally classified as interest income and taxed as such. Upon sale of the debt instrument the gains arising, if any, are classified as capital gains and are taxed as such.

a. Taxability of interest income
As per Section 5 of the ITA, a tax resident of India is taxable on interest income accruing or arising from India or abroad as against a non-resident who is taxable only if the interest accrues or arises or is deemed to accrue or arise in India as per Section 9(1)(v).

 

Interest income payable in the following cases has been deemed to accrue or arise in India:

 

(a) interest payable by the Government of India; or

 

(b) an Indian tax resident, except where the interest is payable in relation to any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on outside India or for the purposes of making or earning any income from any source outside India; or

 

(c) a person who is a non-resident for tax purposes, where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person in India.”

b. Sale, conversion and redemption debt instruments – important tax considerations

i. Sale of debt instruments

According to the Indian capital gains tax regime, where the holder of securities such as debentures, bonds, etc. receives any consideration for the sale of the securities, then subject to computation modes prescribed in the ITA, the difference between the value received by that person and the cost of acquisition is taxed as capital gains.

ii. Conversion of debt instruments

The ITA provides that any profits and gains arising from the transfer of a capital asset are chargeable to tax under the head capital gains.

 

“Transfer”, in relation to a capital asset, has a wide connotation and is defined in Section 2(47) to include sale, exchange or relinquishment of an asset or the extinguishment of any rights in an asset.

 

However, under Section 47(x), (xa) and (xb) – the exemption clauses, any transfer involving the conversion of bonds or debentures, debenture stock or deposit certificates, preference shares of a company into shares or debentures of that company is exempt.

 

As a result, no capital gains will be liable to tax as section 47(x), (xa) and (xb) provides that the provisions of section 45 will not apply to any transfer by way of conversion of debentures, debenture-stock, bonds or deposit certificates, preference shares of a company into shares or debentures of that company.

iii. Redemption of debt instruments

In cases of redemption of debentures, the debenture holder would be exposed to tax on the capital gains accrued on the redemption of debentures. For instance, in the case of a foreign currency convertible bond (FCCB) it should be noted that for the purpose of taxation it is treated as a debt instrument until such time as it is converted into equity shares. Nonetheless, since it is considered a debt instrument it would qualify as a capital asset in the hands of a subscriber/purchaser of the FCCB.
12

 

Further, in the case of redemption of FCCBs, it can be said that the redemption results in the relinquishment of rights in the capital asset (here, FCCB), and hence should give rise to capital gains. The Mumbai ITAT in case of Mrs. Perviz Wang Chuk Basi v. Joint Commissioner of Income-tax, Spl. Range 7 [2006] 102 ITD 123 held that “Thus after the date of redemption, there was an extinguishment of right by operation of contract and also a relinquishment of right in the asset in lieu of which, the assessee received cash from the competent authority. In either of the situations, the case is covered within the definition of Section 2(47) i.e. transfer”.13

 

In the case of a zero coupon FCCB (bonds that are convertible into equity shares after a certain period but no interest is payable until the conversion), an option is provided to the bond holder to either convert the bond into equity shares or redeem it at a premium. Since there is only an extinguishment and relinquishment of rights in the capital asset, and not a payment representing interest, the same should be regarded as capital gains. Further, the Central Board of Direct Taxes (CBDT) has issued Circular no. 2/2002, dated 15 February 2002 discussing the tax treatment of deep discount bonds where it is stated that any payment received on the maturity of such bonds must be treated as interest income. Deep discount bonds are sold at a discounted value and, on maturity, face value is paid to the investors. These are negotiable instruments which are transferable by endorsement and delivery by the transferor. The CBDT vide another Circular no. 3/2006 dated 27 February 2006, has further clarified that the previous circular is applicable in respect of zero coupon bonds issued by specified companies that are notified by the government.

c. Capital gains
The incidence of tax on Capital Gains depends upon the length of the time period for which the capital asset was held before the transfer.

 

i. Classification of capital asset into short-term capital asset and long-term capital asset

 

In the case of capital assets being security (other than a unit) listed on a recognized stock exchange in India, the asset is termed as short term if it is held for a period of not more than 12 months under Section 2(42A) and if held for more than 12 months are termed as long-term assets under Section 2(29A).

 

Units of debt-oriented mutual funds, REITs/InVITs are to be held for more than 36 months to qualify as long-term capital assets – Section 2(42A).

 

The following table summarises the minimum holding period for capital asset (other than equity shares) to qualify as long-term capital asset is as under:-

 

Sr. No. Capital Asset Holding period to qualify as Long Term Capital Asset
1 Listed Preference Shares of a company More than 12 months
2 Unlisted Preference Shares of a company More than 24 months
3 Securities (like debentures, bonds, Government Securities, derivatives, etc.) listed in a recognised stock exchange in India More than 12 months
4 Units of debt-oriented mutual funds (listed or unlisted) More than 36 months
5 Units of REITs/InVITs More than 36 months
6 Units of UTI (whether quoted or not) More than 12 months
7 Zero Coupon Bonds(listed or unlisted) More than 12 months
8 Any other asset More than 36 months

 

For the sale of a security held in an unlisted company, the sale of debentures would be taxed at the rate of 10 percent without indexation or 20 percent with Indexation in the case of long-term capital gains (LTCG). Whereas, Short-term capital gains (STCG) arising from the sale of the same would be taxed at the rate of 30 percent.

 

A large number of Foreign Institutional Investors (FIIs) invest in India via entities in Mauritius, Singapore, Cyprus, Netherlands or others for a variety of reasons including tax efficiency.15 The issue of whether the income of FIIs from trading in securities is “capital gain” or “business income” has been long debated. The AAR in the ruling of Fidelity Advisor Series VIII (Fidelity VIII) [271 ITR 1 (AAR)] has held that such income would be business income keeping in view the intent of the investor and the frequency of transactions. On the other hand, the AAR in Fidelity Northstar 288 ITR 641 (AAR) held that such income would be capital gains in view of the regulatory norms that apply to such investors.

 

The CBDT had issued Circular no. 4 of 2007 dated 15 June 2007 providing guidance in this regard stating the facts and circumstances that should be taken into account to determine whether the income is capital gain or business income. It should be noted that business income of non-residents would not ordinarily be taxable in India in the absence of a Permanent Establishment (PE). Permanent establishment is the threshold provided in the tax treaties as against the threshold of “business connection” provided in the ITA.

 

MAT regime taxation for Debt Instruments

 

The Finance Act, 2017 inter-alia carried out amendments in Section 115JB of the Income tax Act, 1961 (“the Act”) to accommodate the changes in calculation of ‘book profits’ pursuant to Ind-AS adoption by companies. Sub-section 2A principally provides for adjustments to be made to such book profits computed in accordance with the mechanics as stated before such amendment. Sub-section 2C provides for adjustments to be made to ‘book profits’ during the year of convergence for one fifth of the ‘transition amount’. The aforesaid has been defined in clause (iii) to the Explanation to the sub-section. It effectively is defined as the amounts adjusted against ‘other equity’ as on the convergence date.

 

The impact of the above amendments on compound financial instruments, like Compulsorily Convertible Preference Shares, Optionally convertible debentures etc. under Ind-AS 32 regime, where these instruments are treated partly debt and partly equity based on the terms of issuance. After such bifurcation, the finance cost which accrues on the debt, as classified under the Ind-AS regime, is treated as an expense and is debited to the profit and loss account for future years.

 

MAT was introduced as concept to tax companies which due to excessive claims under various allowances under the IT Act were not paying any corporate tax at the time. To circumvent this strategy, 115J (as originally envisaged) was introduced to tax companies on their ‘book profits’. It can be inferred from the judicial guidance available on the subject that Capital receipts are not intended to come under the ambit of MAT. In other words, receipts not taxable at all, cannot be made taxable under the MAT regime. In this particular case, the amount forming part of ‘Other Equity’ forms part of the of the Transition amount subject to exceptions carved out in clause (iii) of explanation (2C) of Section 115JB. The impugned amounts do not form part of the distributable profits for the declaration of dividend. The premise of 115J was to tax only commercial profits. In the current transaction it’s a pure capital receipt not chargeable under any provisions of the Act. In this light a view may be adopted that this amount cannot be taken to form ‘profit’ as per the ‘Statement of Profit and Loss’ as provided for under the provisions of the Companies Act, 2013.

 

The Memorandum explaining the Finance Bill, 2017 on page 27 states

 

“The adjustments arising on account of transition to Ind AS from existing Indian GAAP is required to be recorded directly in Other Equity at the date of transition to Ind AS. Several of these items would subsequently never be reclassified to the statement of profit and loss / included in the computation of book profits. Accordingly, the following treatment is proposed: (I) Those adjustments recorded in other comprehensive income and which would subsequently be reclassified to the profit and loss, shall be included in book profits in the year in which these are reclassified to the profit and loss;… (III) All other adjustments recorded in Reserves and Surplus (excluding Capital Reserve and Securities Premium Reserve) as referred to in Division II of Schedule III of Companies Act, 2013 and which would otherwise never subsequently be reclassified to the profit and loss account, shall be included in the book profits, equally over a period of five years starting from the year of first time adoption of Ind AS…”

 

It may be worth appreciating the reply of CBDT in Circular Number 24/2017 and in specific the Query Number 9 in this regard where the CBDT states that “equity component of financial instruments such as NCD’s, interest free loans would be included in the transition amount” however this does not address the situation qua transition amount and distributable profit and therefore should not apply in the present case. This unsettles the view to make “capital” taxable instead of “income”. Such a stand is fortified in view of Query Number 8 of the said circular that disallows amount of interest in relation to preference shares debited to P&L. As regards the amount charged to the P&L, the same is notional in nature and does not represent any ‘real’ expense. Hence, notional entries against income or expenditure are treated equally.

 

Ind-AS provisions merely seek to reclassify the financial instruments into equity and debt. No income accrues through this reclassification.

 

Section 43 of the Companies Act, 2013 further provides that this receipt was always recognized as a capital receipt.

 

As such, these provisions go well beyond the charging provisions of the IT Act and it may well be possible that they are challenged on their constitution vires being outside the scope of Entry 82, Schedule VII to the Constitution of India – Taxes on income other than agricultural income since it’s a notional entry being capital receipt and does not partake the nature of ‘income’.

 

While the Courts in the past (Navinchandra Mafatlal v. CIT) have upheld the right of the Parliament to tax capital receipt not forming part of income, however what seems to sway in favour of the Tax Payer here is the fact that this ‘income’ is accruing only because of an accounting entry and in light of the ICDS decision of the Hon’ble High Court of Delhi it may be tenable to argue against its constitutionality.

 

Tax Overview of Different Debt Instruments

1. Deep Discount Bonds (DDBs), Zero-Coupon Bonds (ZCBs) and Discount Bonds (DBs)

Issuer Usually financial institutions, infrastructure capital fund, Government
undertakings, scheduled banks and large Indian companies including infrastructure capital companies.
Eligible foreign investors FPIs

NRIs

Exchange rate risk Since the investment is in INR, the exchange rate risk is borne by the foreign investor.
Period of holding for classification as a long term capital asset – Section 2(29A) and 2(42A) 12 months or more for listed securities

36 months or more for unlisted securities

Taxation of capital gains under the Indian tax law* DDBs (as per a clarification issued by the Government)

 Transfer before maturity – difference between sale price and the cost of bond (value as on last valuation date) taxable as Short Term Capital Gains (STCG).

ZCBs (as per the Indian tax law)

 Transfer before maturity – difference between sale price and the cost of bond taxable as capital gains;
 On maturity or redemption – difference between face value of bond and acquisition price taxable as capital gains.

DBs

 Transfer before maturity – difference between sale price and the cost of bond taxable as capital gains;
 Where the DBs carry coupon which is commensurate with the market rate, redemption premium could be arguably, regarded as capital gains

FPIs: LTCG – 10%; and STCG – 30 %

NRIs: LTCG – 10%/20%; and STCG – 30%

Taxation of interest income under the Indian tax law* DDBs (as per a clarification issued by the Government)
Yearly accretion
– Bonds to be marked to market at every year end;
– Accretion (difference between bid price/cost and market value at the year end) generally taxable as interest income.
On maturity or redemption
– Difference between redemption price and value as on the last valuation date/cost is generally taxable as interest income.
Discount Bonds
On maturity or redemption
– Difference between face value of the bond and acquisition price is generally taxable as interest income.
FPIs: 5%/20%
Others: 20%/30%
Withholding tax rate on interest income in India Income in respect of investment in ZCB is not subject to withholding tax rate.
Interest in respect of investment in DDBs and DBs is subject to withholding tax at the rates mentioned below:
• FPIs: 5%/ 20%
• NRIs: 20%/30%

* Treaty provisions where beneficial may be applied

 

2. Listed Non-Convertible Debentures (NCDs)/Bonds (including Credit Enhanced Bonds)

Issuer Indian companies
Eligible foreign investors FPIs

NRIs

Exchange rate risk Since the investment is in INR, the exchange rate risk is borne by the
foreign investor.
Period of holding for classification as a long term capital asset 12 months or more
Taxation of capital gains under the Indian tax law* FPIs: LTCG – 10%; and STCG – 30%

NRIs: LTCG – 10%/20%; and STCG – 30%

Taxation of interest income under the Indian tax law* FPIs: 5%/ 20%
NRIs: 20%/30%
Withholding tax rate on interest income in India FPIs: 5%/ 20%
NRIs: 20%/30%

* Treaty provisions where beneficial may be applied

 

3. Unlisted Corporate Debt Securities (Bonds and NCDs)

Issuer Indian companies
Eligible foreign investors FPIs

NRIs

Exchange rate risk Since the investment is in INR, the exchange rate risk is borne by the foreign investor.
Period of holding for classification as a long term capital asset 36 months or more
Taxation of capital gains under the Indian tax law* FPIs: LTCG – 10%; and STCG – 30%

NRIs: LTCG – 10%; and STCG – 30%

Taxation of interest income under the Indian tax law* FPIs: 5%/ 20%
NRIs: 20%/30%
Withholding tax rate on interest income in India FPIs: 5%/ 20%
NRIs: 20%/30%

* Treaty provisions where beneficial may be applied

 

4. Units of a Debt Oriented Mutual Fund

Issuer Scheme of Debt Oriented Mutual Funds registered with SEBI
Eligible foreign investors FPIs

NRIs

Exchange rate risk Since the investment is in INR, the exchange rate risk is borne by the foreign investor.
Period of holding for classification as a long term capital asset 36 months or more for listed or unlisted securities
Taxation of capital gains under the Indian tax law* FPIs: LTCG – 10%; and STCG – 30%

NRIs: LTCG – 10%; and STCG – 30%

Taxation of dividend income under the Indian tax law* Dividend income earned from units of a debt oriented mutual fund shall be exempt in the hands of the investor
Withholding tax rate on interest income in India Not applicable

* Treaty provisions where beneficial may be applied

 

5. Non Convertible Redeemable Preference Share (NCRPS)

Issuer Any public company”, PSU or statutory corporation can issue or propose to issue, or seek to list its NCRPS on a recognized stock exchange.
Eligible foreign investors FPIs

NRIs

Exchange rate risk Since the investment is in INR, the exchange rate risk is borne by the foreign investor.
Returns Dividends or redemption. Dividends must be paid out of distributable profits. Redemption may be out of distributable profits, proceeds of fresh issue of shares made for the purpose of redemption. Redemption premium shall be paid out of securities premium account.
Period of holding for classification as a long term capital asset 12 months or more for listed

24 months or more for unlisted

Tax Treatment for Issuer Dividend or redemption will not be a tax deductible expense for the issuer.
Tax treatment on distribution of dividend Subject to additional dividend distribution tax of 15%.
Tax treatment at the hands of investor under the Indian tax law* Dividends are tax free in the hands of the recipient.
Redemption premium classified as capital gains.
Deemed Dividend Redemption premium cannot be classified as deemed dividend to the extent of accumulated profits.
Provisions related to Deemed dividend under Section 2(22)(d) and section 2(22)(e) will not be applicable in the event of redemption of Preference shares.
Taxation of capital gains under the Indian tax law* Listed:
FPIs: LTCG – 10%; and STCG – 30%
NRIs: LTCG – 10%/20%; and STCG – 30%
Unlisted:
FPIs: LTCG – 10%; and STCG – 30%
NRIs: LTCG – 10%; and STCG – 30%
Liquidation Preference Subordinated to NCDs, senior to equity.

* Treaty provisions where beneficial may be applied

 

1 CEPT v. Bhartia Electric Steel Co. Ltd (1954) 25 ITR 192 (Cal.).
2 Kirloskar Electric Co. Ltd v. CIT (1997) 228 ITR 674 (Karn.).
3Thapar (LM) v. CIT (1988) 173 ITR 577 (Cal.).
4Dey’s Medical Stores Mfg (P) Ltd v. CIT (1986) 162 ITR 630 (Cal.).
5Ritz Continental Hotels Ltd v. CIT (1978) 114 ITR 554 (Cal.).
6Triveni Engg Works Ltd v. CIT (1987) 167 ITR 742 (All.).
7S. 92 of the ITA provides for determination of arm’s length price in international transactions whereas s. 40A(2)(b) of the ITA provides for disallowance of any excessive expenditure incurred in favour of a related party.
8Bharti Airtel Ltd v. Asstt. CIT (2010) 48 DTR 416 (Trib.)(Mum.).
9Mittal Metal v. ITO, 2008 ITS 1465 ITAT; see also CBDT Circular no.6P (LXXVI-66) of 1968, dated 6 July 1968.
10[1999] 63 Taxman 370 (Ahd.); see also Sona Steering Systems Ltd v. CIT [2003] 129 Taxman 152 (Mag.).
11[2008] 175 Taxman 567.
12This assumes that the debt instruments are not held as stock in trade in which case they would be treated as a revenue receipt. There are a number of judicial precedents stating that even a debt instrument such as a fixed deposit in a bank or foreign currency by itself should qualify as a capital asset.
13See also M.P. Financial Corporation v. CIT [1981] 132 ITR 884.
14The Securities Contracts (Regulations) Act, 1956 in Section 2(h) defines the term “security” to mean –
“(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; (ia) derivative; (ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes; (ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (id) units or any other such instrument issued to the investors under any mutual fund scheme; (ii) Government securities; (iia) such other instruments as may be declared by the Central Government to be securities; and (iii) rights or interest in securities”.
15 Section 90(2) of the ITA provides that the provisions of the ITA or the tax treaty whichever are more beneficial apply to a taxpayer.

(This article was first published in the Journal of the Chambers of Tax Consultants – April 2019 edition)

Authored by Anand Bathiya, a Chartered Accountant and Partner along with Rima Gandhi, a Chartered Account and Senior Manager at Bathiya & Associates LLP. The Authors can be reached at anand.bathiya@bathiya.com and rima.gandhi@bathiya.com

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