Ministry of Finance
Cabinet approves launch of Bharat Bond Exchange Traded Fund
Fund to provide additional money for CPSUs, CPSEs & other Government organizations
Dated: 04 DEC 2019
The Cabinet Committee on Economic Affairs, chaired by Prime Minister Shri Narendra Modi has given its approval for creation and launch of Bharat Bond Exchange Traded Fund (ETF) to create an additional source of funding for Central Public Sector Undertakings (CPSUs) Central Public Sector Enterprises (CPSEs), Central Public Financial Institutions (CPFIs) and other Government organizations. Bharat Bond ETF would be the first corporate Bond ETF in the country.
Features of Bharat Bond ETF:
ETF will be a basket of bonds issued by CPSE/CPSU/CPFI/any other Government organization Bonds (Initially, all AAA rated bonds)
• Tradable on exchange
• Small unit size Rs 1,000
• Transparent NAV (Periodic live NAV during the day)
• Transparent Portfolio (Daily disclosure on website)
• Low cost (0.0005%)
Bharat Bond ETF Structure:
• Each ETF will have a fixed maturity date
• The ETF will track the underlying Index on risk replication basis, i.e. matching Credit Quality and Average Maturity of the Index
• Will invest in a portfolio of bonds of CPSE, CPSU, CPFI or any other Government organizations that matures on or before the maturity date of the ETF
• As of now, it will have 2 maturity series - 3 and 10 years. Each series will have a separate index of the same maturity series.
• Index will be constructed by an independent index provider – National Sock Exchange
• Different indices tracking specific maturity years - 3 and 10 years
Benefits of Bharat Bond ETF to investors:
• Bond ETF will provide safety (underlying bonds are issued by CPSEs and other Government owned entities), liquidity (tradability on exchange) and predictable tax efficient returns (target maturity structure).
• It will also provide access to retail investors to invest in bonds with smaller amount (as low as Rs. 1,000) thereby providing easy and low-cost access to bond markets.
• This will increase participation of retail investors who are currently not participating in bond markets due to liquidity and accessibility constraints.
• Tax efficiency compared to Bonds as coupons from the Bonds are taxed at marginal rates. Bond ETFs are taxed with the benefit of indexation which significantly reduces the tax on capital gains for investor.
Bharat Bond ETF Benefits for CPSEs:
• Bond ETF would offer CPSEs, CPSUs, CPFIs and other Government organizations an additional source of meeting their borrowing requirements apart from bank financing.
• It will expand their investor base through retail and HNI participation which can increase demand for their bonds. With increase in demand for their bonds, these issuers may be able to borrow at reduced cost thereby reducing their cost of borrowing over a period of time.
• Further, Bond ETF trading on the exchange will help in better price discovery of the underlying bonds.
• Since a broad debt calendar to assess the borrowing needs of the CPSEs would be prepared and approved each year, it would inculcate borrowing discipline in the CPSEs at least to the extent of this investment.
Developmental impact on Bond Markets:
• Target Maturity Bond ETF is expected to create a yield curve and a ladder of Bond ETFs with different maturities across calendar years.
• ETF is expected to create new eco-system - Market Makers, index providers and awareness amongst investors - for launching new Bond ETFs in India.
• This is expected to eventually increase the size of bond ETFs in India leading to achieving key objectives at a larger scale - deepening bond markets, enhancing retail participation and reducing borrowing costs.
(Release ID: 1594816)
Government of India
Ministry of Finance
Dated: 22 NOV 2019
CBDT Chairman inaugurates Web Portal for exchange of information on Income Tax Website
Shri P.C. Mody, Chairman, Central Board of Direct Taxes (CBDT), inaugurated the Web Portal for Exchange of Information on Income Tax Website here today.
The Web Portal consolidates all the relevant Automatic Exchange of Information (AEOI) related information at one place for convenient access by financial institutions, Departmental officers as well as public at large.
India is committed to exchange financial account information automatically from 2017 under the Common Reporting Standard (CRS) on Automatic Exchange of Information (AEOI). Information is reported annually by financial institutions which are then exchanged by India under the standard.
The Web Portal would be a repository of policy and technical circulars/guidance/notifications issued by the CBDT, and provide links to relevant circulars/guidance issued by the regulatory authorities in India and other international bodies. The portal would not only be useful for the domestic financial institutions but will also help the foreign tax authorities and financial institutions to get information about the Indian laws, rules and procedures related to AEOI under CRS.
To implement the AEOI standard, necessary domestic legal framework was put in place in 2015. A comprehensive Guidance Note was released on 31st August 2015 to provide guidance to the financial institutions, sectoral regulators and officers of the Income Tax Department for ensuring compliance with the reporting requirements under the Income-tax Act and Rules. The sectoral regulators have also issued necessary notifications and circulars for compliance by the financial institutions. Stakeholder consultations are also carried out by CBDT to educate financial institutions about their reporting obligations. In its persistent endeavour to reach out to the financial institutions and account holders, CBDT has created an Exchange of Information portal on the Income-tax Department website for dissemination of information to all stakeholders.
Cabinet approves Taxation Laws (Amendment) Bill, 2019
Dated: 20 NOV 2019
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the proposal for introducing the Taxation Laws (Amendment) Bill, 2019 in order to replace the Ordinance.
Economic developments after the enactment of the Finance (No. 2) Act, 2019 (Finance Act) along with reduction of rate of corporate income tax by many countries world over necessitated the provision of additional fiscal stimulus to attract investment, generate employment and boost the economy. As these could have been achieved through amendment to the Income-tax Act, 1961 (IT Act) or to the Finance Act and the Parliament was not in session, it was done through promulgation of The Taxation Laws (Amendment) Ordinance 2019 (the Ordinance) in September, 2019. Salient features of the amendments made by the Ordinance are provided in the following paras.
In order to promote growth and investment, a new provision was inserted in the IT Act to provide that with effect from the current financial year 2019-20, an existing domestic company may opt to pay tax at 22% plus surcharge at 10% and cess at 4%, if it does not claim any incentive/deduction. The effective tax rate for these companies comes to 25.17% for these companies. They would also not be subjected to Minimum Alternate Tax (MAT).
In order to attract fresh investment in manufacturing and provide boost to 'Make-in India' initiative of the Government, another provision was inserted to the IT Act, to provide that a domestic manufacturing company set up on or after 1st October, 2019 and which commences manufacturing by 31st March, 2023, may opt to pay tax at 15% plus surcharge at 10% and cess at 4% if it does not claim any incentive/deduction. The effective rate of tax comes to 17.16% for these companies. They would also not be subjected to MAT.
A company which does not opt for the concessional tax regime and avails the tax exemption/incentive shall continue to pay tax at the pre-amended rate. However, these companies can opt for the concessional tax regime after expiry of their tax holiday/exemption period. After the exercise of the option they shall be liable to pay tax at the rate of 22%. Further, in order to provide relief to companies which continue to avail exemptions/incentive, the rate of MAT was reduced from existing 18.5% to 15%.
In order to provide relief to listed companies, the buy-back tax on shares of listed companies introduced through the Finance Act will not apply to buy-backs in respect of which public announcement were made before 5th July, 2019.
In order to stabilise the flow of funds into the capital market, it was provided that the enhanced surcharge introduced through the Finance Act on capital gains arising on account of transfer of listed equity share or certain units which are liable to securities transaction tax will not apply. Further, it was also provided that the enhanced surcharge will not apply to capital gains income of FPIs arising out of transfer of any security including derivatives, having concessional tax regime.
(Release ID: 1592558)