Tax impact: Tax impact plays an important role in defining one`s own investment strategy. Under India`s current tax system, there is no withholding tax deduction for interest payments for listed un surrendered insurance funds (excluding payments/issue under Section 193 of the Income Tax Act, 1961). In addition, all interest obtained is taxable according to the corresponding tax bars of the investor. Each sale of NCD listed in the year following the subscription is subject to short-term capital gains tax (STGT) and the sale after one year will attract the long-term earnings tax (LTGT) with an indexation of 20% and 10% without indexation. For RNA investors, non-negotiable investments in convertible foreign currencies are taxable at 20% and LTGT at 10% of capital gains not indexed to the cost of acquisition. However, STTTs are taxed at normal rates. Risk of incorrect or insufficient documentation: When it comes to applicability, documentation and establishment of Trust Deed (DTD) /Debenture Subscription Agreement, Debenture Trustee Agreement (DTA) and security documents become critical. It is important to ensure that agreements are carefully developed, duly labelled and registered to protect the investor`s interests and ensure a smooth transition into the implementation phase. The DBA/DTD should clearly define the objective, objective and creation of trust, rights, obligations, responsible objectives, while ensuring a good corporate governance policy as well as liability and compensation to an agent. The documentation must first comply with the Indian Contract Act, 1872, Transfer of Property Act, 1982 and the Indian Trust Act, 1882 (Indian Trust Act). For example, certain provisions of the Indian Trust Act must be included in the DTD, while ensuring the DTD`s ability to arbitrate, as demonstrated by the recent Supreme Court decision that disputes arising from Trust Deeds and the Indian Trusts Act cannot be referred to arbitration.
. Eligible investors: The main idea for an investor is to determine whether he is qualified as an eligible investor. Several categories of domestic and foreign investors may invest in listed non-negotiable companies, subject to their respective regulatory regimes. For domestic investors, individual residents, businesses, hedge funds, mutual funds (MFs) and non-bank financial institutions (NBFC) are allowed to invest. For non-resident investors, non-resident Indians, foreign portfolio investors (REITs) (the REIT provisions have subsumed the institutional investor and the qualified investor regime) and foreign venture capitalists (FVCI) may invest in non-negotiable, non-negotiable listed investments.