The government has expanded the list of securities that will be eligible for tax exemption on a recognised stock exchange in an International Financial Services Centre (IFSC).
Under section 47(viiab) of the Income-tax Act, any transfer of bonds or GDRs, rupee denominated bonds of an Indian company and derivatives by a non-resident on IFSC exchanges are not treated as transfer provided the consideration is paid or payable in foreign currency.
Units of a scheme, investment trust and that of an exchange traded fund are now eligible for exemption as well.
“The new fund regime provides for funds to be set up as investment trust. So, the law required inclusion of units issued by such trusts for the purpose of exemption from capital gains. Similarly, ETFs listed and traded on the stock exchanges in GIFT City would now qualify for capital gains tax exemption. These changes would further expand the scope of incentives available for funds and stock market trading in IFSC,” said Sunil Gidwani, Partner - Financial Services, Nangia Andersen.
The notification widens the relaxation for units of ETFs, REITs and InvITs as several such funds are looking to get listed at IFSC, said Sandeep Sehgal, partner, AKM Global. The fund framework was overhauled a year ago but the specific exemption to such funds was not available.
The move may give a boost to the setup of REITs and InVITs as well as launch of ETFs at IFSC, according to Yashesh Ashar, partner, Illume Advisory. This would facilitate the future growth for listed AIFs once such listing platform is made live, he said.