Finmin May Reduce Withholding Tax For FIIs To Boost Corp Bonds


MUMBAI: To spur foreign investment in the corporate bond market, the Finance Ministry has proposed reduction in withholding tax for FIIs to 5 percent, from 20 percent at present.

As the ministry braces up for a new minister after the BJP government is sworn in this evening, the capital markets division would also make a case for deepening the currency derivatives market and make it easier for FIIs to hedge risks.

These suggestions will be placed before the new minister who is to assume office tomorrow.

In a note prepared for the new government, the ministry has proposed cutting withholding tax for FIIs in non- infrastructure corporate bonds to 5 percent, thus favouring uniform withholding tax for all FIIs investing in corporate bonds.

"The withholding tax for FIIs in non-infrastructure bond issuance by companies is 20percent, which may be brought down to 5 percent," said a Finance Ministry official.

Last year, the government had cut the withholding tax rate on foreign investment in infrastructure corporate bonds to 5 percent for two years from 20 percent.

"We want to create a level-playing field for foreign investors in corporate bond market," the official added.

Source: PTI