Big boost coming in the way of those intending to
deal in ODI, NDF and OTC from our home ground Gift City.
Income generated by Non residents’ through the
following instruments by way of transfer or distribution on ODI shall be exempt
from double Taxation
1. Non-deliverable forward
contracts (NDF) or
2. Offshore derivative
instruments (ODI) or
3. Over-the counter derivatives
(OTC Derivatives).
Now, such income would be taxable only at hands of
the issuer of these instruments and not at the hands of the Subscriber which
was not the case earlier.
However, such instruments need to be necessarily
issued by an offshore Banking Unit based out of IFSC (such as GIFT City). Also,
the subscription can not be done by the India Unit owned by the NR.
What is NDF: The NDF provides foreign investors
with a method to hedge their currency risk associated with movements in the
rupee. Its a cash settled contract.
What is ODI: ODI, also known as Participatory
notes (p-notes) are instruments used by the foreign investors to invest in
India’s securities markets without getting registered with SEBI. ODIs may be
issued on shares, bonds and derivatives. However, ODI is a heavily regulated
instrument governed by SEBI which means the Issuer has to follow host of
compliances.
What is OTC Derivative: This is a customised
private financial contract between two parties with no intervention of Stock
Exchange or SEBI. The underlying can be any asset class.
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