No Capital gains tax on offshore rupee bonds: CBDT

NEW DELHI: The Central Board of Direct Taxes ( CBDT), India’s apex direct taxes body, has said investors will not face any tax on capital gains on offshore rupee bonds.

"It has been decided that 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," the Central Board of Direct Taxes said in a statement on Thursday.

Legislative amendment in this regard will be proposed through the Finance Bill, 2016, it said.

However, interest income from these INR off-shore bonds in the case of non-resident investors would attract 5% withholding tax.

"Withholding tax at the rate of 5%, which is in the nature of final tax, would be applicable in the same way as it is applicable for off-shore dollar denominated bonds," it said.

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