Budget impact: Tax concession to boost masala bond market

These bonds are listed on markets outside India such as the London and Singapore stock exchanges

Rupee-denominated offshore bonds ('masala bonds'), are to get a boost, with the Union Budget proposing to extend the concessional withholding tax rate of five per cent by three years to July 2020. And, exempting taxation on transfer of such bonds for non-residents.

In line with an earlier announcement, the Finance Bill proposed to extend the concessional withholding tax rate of five per cent as currently applicable to foreign currency bonds and external commercial borrowings to masala bonds issued before July 1, 2020.

Further, offshore transfer of masala bonds, issued abroad, from one non-resident to another would not be regarded as a taxable