Unsponsored depository receipts have not got the taxman’s blessings going by the latest budget.
The Budget has made it clear that tax benefits would continue to be available to only sponsored global depository receipts (GDRs) issued by listed companies.
This is even as the Centre had recently allowed issuance of unsponsored depository receipts in global markets.
The jury is still out as to whether the taxman’s decision not to confer tax benefits on unsponsored GDRs will dampen interest in this mechanism from Indian issuers and investors.
The Finance Ministry had recently notified new depository receipts scheme, which now allows depository receipts to be issued against securities of listed, unlisted or private or public companies against all underlying securities.
The underlying securities would cover debt instruments, shares or units etc. Both the sponsored issues and unsponsored DR issuance has now been permitted.
Prior to this policy change, only sponsored GDRs were permitted out of India and that too only by a listed company or one that was going for simultaneous listing in India and abroad.
Srivats.kr@thehindu.co.in
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