Market Linked Debentures – Vinod Kothari Consultants

Recent amendments relating to Corporate Bonds

February 22, 2023/0 Comments/in Corporate Laws, LODR, NCS, SEBI, Training & Workshops /by Staff

– Vinita Nair, Aanchal Kaur Nagpal & Payal Agarwal | corplaw@vinodkothari.com

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Read our related resources here :

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SEBI Consultation Paper on NCS regulations: Changes in Offer Doc. | Mandatory Listing | Disclosure of Issue expense
SEBIs Consultation Paper on review of CG norms for a High Value Debt Listed Entities
SEBI to provide debenture holders the right to object material related party transactions

Recent amendments relating to Corporate Bonds

February 18, 2023/0 Comments/in Bond Market, Corporate Laws, LODR, NCS, SEBI /by Vinita Nair Dedhia

– Vinita Nair, Senior Parnter | corplaw@vinodkothari.com

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Market-linked debentures: Is it the end of the market for them?

February 1, 2023/4 Comments/in Budgetary Publications, Capital Markets, Financial Services, Taxation /by Aanchal Kaur Nagpal

– Aanchal Kaur Nagpal, Manager | finserv@vinodkothari.com

Tax proposal to tax gains on MLDs as short-term capital gains

The Budget proposes that the capital gains on market linked debentures (MLDs) will be taxed as short term capital gain.

Presently, MLDs are mostly listed, and as listed securities they have 2 advantages:

First , there are exempt from withholding tax. This is one of the carve-outs in sec. 193
Secondly, the holding period for capital gain purposes is 12 months, as opposed to 36 months in case of normal capital assets. This comes from sec. 2 (42A) of the Act. Therefore, if a listed security is held for at least 12 months, and transferred or redeemed thereafter, the gain will be taxed as long term capital gain, with a rate as low as 10%.

Market linked debentures is a concept that prevails world-over, with different names such as equity-linked bonds, index-linked bonds, etc. However, in India, the issuance of MLDs was being exploited as a regulatory and tax arbitrage device.