Govt likely to treat IDRs on par with listed securities

NEW DELHI: The government is likely to spell out that Indian Depository Receipts (IDR) would be treated on par with listed securities in the country, a move that will clear the air on the taxation of this instrument which is yet to take-off since its launch in 2004.

This would mean that IDRs would be subject to the securities transaction tax (STT) but would be exempt from long-term capital gains tax.

A government official privy to the development said that the finance ministry is actively looking at the proposal and the issue may be clarified in the forthcoming budget.

IDRs are derivative instruments like global depository receipts (GDRs) and American depository receipts (ADRs) that have shares as the underlying asset. Indian companies raise capital overseas through ADRs and GDRs. The IDRs would allow foreign companies to raise capital in India. Like any other depository receipts IDRs are negotiable financial instruments, issued by a local depository against the shares of the foreign company���s publicly-traded securities held by it.