Taxation of income from off-shore Rupee Denominated Bonds

Government of India

Ministry of Finance

Department of Revenue

Central Board of
Direct Taxes



New Delhi, 29th October, 2015

Subject: Taxation of
income from off-shore Rupee Denominated Bonds-reg.

The Reserve Bank of India has recently permitted Indian
corporates to issue rupee denominated bonds outside India.

The matter of taxation of income from such bonds under

Act, 1961 has been considered by the Government.

In so far as taxation of interest income from these INR
off-shore bonds in the case of non-resident investors is concerned, it is
clarified that withholding tax at the rate of 5 percent, which is in the nature
of fmal tax, would be applicable in the same way as it is applicable for
off-shore dollar denominated bonds.

Further, it has been decided that the Capital gains, arising
in case of appreciation of rupee between the date of Issue and the date of
redemption against the foreign currency in which the investment is made; would be
exempted from capital gains tax. Legislative amendment in this regard will be
proposed through the Finance Bill, 2016.

(Shefali Shah)

Pr. Commissioner of
Income Tax (OSD)

Spokesperson, CBDT


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