Budget 2021-22 + FINANCE Bill, 2021

Issuance of zero coupon bond by infrastructure debt fund

Clause (48) of section 2 of the Act provides for definition of zero coupon bond, as a bond issued by any infrastructure capital company or infrastructure capital fund or public sector company or scheduled bank and in respect of which no payment and benefit is received or receivable before maturity or redemption. These are required to be notified by the Central Government in the Official Gazette.

In order to enable infrastructure debt fund [which are notified by the Central Government in the Official Gazette under clause (47) of section 10 of the Act] to issue zero coupon bond necessary amendments are proposed in clause (48) of section 2 of the Act. Rules 2F and 8B of Income-tax Rules shall be amendment subsequently after the Finance Bill 2021 is enacted.

This amendment will take effect from 1st April, 2022 and will accordingly apply to the assessment year 2022-23 and subsequent assessment years.

[Clause 3]

Consequential amendment has also been proposed in clause (x) of sub-section (3) of section 194A of the Act which will take effect from 1st April, 2021

[Clause 45]

 

---

Full Text:

Budget 2021-22 + FINANCE Bill, 2021

Zero coupon bond issuance by infrastructure debt funds permitted, triggering tax-rule amendments and retrospective withholding changes. Amendment to the definition of zero coupon bond extends eligible issuers to include notified infrastructure debt funds, enabling those funds to issue instruments with no payment or benefit before maturity; implementing amendments to Income-tax Rules (including Rules 2F and 8B) and an associated amendment to withholding provisions in section 194A are contemplated, with specified staged effective dates and Official Gazette notifications to operationalise the changes.