- personalfn
Let’s face it! Tax disputes are not new to India. During the budget session, the Finance Minister revealed there are about 3 lakh cases pending with a disputed amount of over Rs 5.5 lakh crore.Tax adventurism and ambiguities involved in deciding the tax liabilities of the assessees have negatively affected India’s investment climate. Being resolute about improving the experience of corporates investing in India, the Government has been working extensively on simplifying the tax structure, making it more investor-friendly.
As a part of this initiative, the Government recently provided clarity on the tax treatment to convertible debentures. So far, there’s been a practice of treating the date of conversion (from debenture/bond to equity) as the time of acquisition of shares, to calculate the holding period for capital gains. However, the lack of clarity about this subject was leading to disputes and Foreign Investors have been demanding clarity on this front consistently.
The Central Board of Direct Taxes (CBDT) has issued a circular clarifying that the tax department would treat convertible debentures and shares as a single security set to calculate the number of days of holding debentures while computing capital gains, instead of treating them as individual securities. This clarification would make the date of conversion irrelevant.
What’s the impact on India Inc.?
Companies often issue convertible debentures to foreign investors to garner money. Companies use convertible debentures and bonds in merger and acquisition cases. As the Government has addressed the concerns of many investors, the sentiment of investors would get a boost. This development will not only help in making India more investor’s friendly, but would also support mergers and acquisition activities that are critical from the viewpoint of consolidation within a particular industry.
Such small but effective reforms may edge India closer to achieving its mission the “ease of doing business”.
The Central Board of Direct Taxes (CBDT) has issued a circular clarifying that the tax department would treat convertible debentures and shares as a single security set to calculate the number of days of holding debentures while computing capital gains, instead of treating them as individual securities. This clarification would make the date of conversion irrelevant.
What’s the impact on India Inc.?
Companies often issue convertible debentures to foreign investors to garner money. Companies use convertible debentures and bonds in merger and acquisition cases. As the Government has addressed the concerns of many investors, the sentiment of investors would get a boost. This development will not only help in making India more investor’s friendly, but would also support mergers and acquisition activities that are critical from the viewpoint of consolidation within a particular industry.
Such small but effective reforms may edge India closer to achieving its mission the “ease of doing business”.
Thanks for sharing about simplifying tax structure. Taxpayers must make sure they are not engaging in tax avoidance or tax evasion, even though it deals with the lowering of income tax liabilities. You can also check out about Tax Planning Services here.
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