SEBI seeks clarity on tax benefits for REITs, infra bonds

'FII tax on infra bond needs to be clear'

SEBI seeks clarity on tax benefits for REITs, infra bonds

The Securities and Exchange Board of India (SEBI) on Saturday said that it has taken up taxation issues with the government for the proposed Real Estate Investment Trusts (REITs) and infrastructure corporate bonds.

Speaking at a summit organised by Skoch Consultancy Services, SEBI chairman U K Sinha said: “We have come out with a discussion paper on Real Estate Investment Trust and are hoping to get it implemented soon. Our rules are ready, we have taken up with the government that these must be given a pass-through certificate status so far as tax status is concerned.”

Tax clarity

Expressing hopes that the government will consider the demand favourably, Sinha said: “The moment there is a clarity on that, we will come out with our regulations.”  He also wanted a tax clarity on infrastructure corporate bonds for  foreign institutional investors (FIIs).

“In the infrastructure sector, if a bond is issued and there is a FII, which is investing in that, what is the level of tax with that entity? If it is vastly different from the withholding tax which is imposed on others, should there be different set of rules for FIIs and domestic institutional investors? These are the issues we are looking at,” Sinha said.

On the need to expand corporate bond markets, Sinha said that necessary infrastructure for this was already in place and the related regulations have been simplified. “I believe an emerging market like India must focus on development of the market. The Sebi Act mandate is to work for growth of the market,” he said.

He also wanted the government to enact a law to replace an ordinance which provides SEBI the regulatory jurisdiction of  all unregulated entities that take deposits of at least Rs 100 crore.  “An ordinance is an ordinance. It has a limited life. I am hopeful that the government will consider that this ordinance is converted into an act very soon,” said Sinha.

The SEBI chief said there are still a large number of unregulated fund raising activities. These are coming under various names--chit funds or nidhi companies, housing schemes.
“That menace has not still been fully controlled,” he added.

Sinha pointed out that since the ordinance was promulgated, SEBI has taken action in more than 25 cases. “We have passed our orders, we have stopped them from raising money.”

It may be noted that the market regulator on Thursday had announced a slew of reforms related to IPO and Offer-for-Sale in order to boost primary markets. Besides keeping minimum dilution to public in IPO at 25 per cent or Rs 400 crore, the market watchdog has also approved sharing Know Your Customer (KYC) information with other financial regulators.

To usher in more transparency, SEBI has even revised certain guidelines for alternative investment funds, including stricter disclosure requirements.

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