Sebi presses for uniformity in taxes on corporate bonds

Ahead of the Budget, the Securities and Exchange Board of India (Sebi) has asked the government to do away with tax anomalies in corporate debt to attract investors, particularly in infrastructure papers. The market regulator has also sought the status of pass-through certificates for the proposed real estate investment trusts (Reits).

Withholding tax on corporate bonds varies from five per cent to 20 per cent. “Those have to be reconciled. The government has to come out with a detailed middle- to long-term policy on this,” Sebi Chairman U K Sinha told reporters on the sidelines of an event organised by Skoch Consultancy Services here on Saturday.

He added withholding taxes for foreign institutional investors in infrastructure bonds were different from those of others and, therefore, had to be revised. Sinha said there was a problem in terms of widening the investor base, as different sectoral regulators had their own requirements pertaining to their regulated entities.

“The matter is under consideration in the forum of regulators and the government. I am hopeful some progress will be made,” Sinha said.

“We have come out with a discussion paper on real estate investment trusts and are hoping to get it implemented soon. Our rules are ready; we have taken up with the government that these must be given pass-through certificate status, as far as tax is concerned,” Sinha said.

In the case of pass-through certificates, only investors in such funds are taxed; no tax is imposed at the fund level.

On e-voting facility for shareholders, Sinha said listed companies had to follow Sebi norms. Recently, the corporate affairs ministry had extended the deadline for companies to mandatorily have e-voting facility under the new Companies Act till December. Sebi mandates all listed companies to provide this facility for all resolutions to be passed at general meetings.

“It is a settled principle that if there are two provisions, the provisions of Sebi regulations will prevail, as far as listed companies are concerned,” Sinha said.

Responding to a query on the low interest of sovereign wealth funds in government securities, Sinha said the situation had to be looked at for some more time. “I would say you should wait for some more time because there has been a change of government and people outside India are waiting for new policies,” he said.

He added the government should replace an ordinance that provided Sebi regulatory jurisdiction over all unregulated entities taking deposits of at least Rs 100 crore with an Act  in this regard.