CBDT notifies concessional tax rates for GDRs issued to staff

Our Economic Bureau

New Delhi, Nov 20: The Central Board of Direct Taxes (CBDT) has notified that the global depository receipts (GDRs) issued to employees under foreign convertible bonds and ordinary shares would be eligible for concessional rate of taxation.

According to an official release, GDRs issued to employees under foreign currency convertible bonds and ordinary shares (through Depository Receipt Mechanism) Scheme 1993, would be eligible for concessional rate of taxation under Section 115 ACA of the Income Tax Act. The dividend received on such GDRs, other than dividends referred to in Section 115-O, would be taxed at the rate of 10 per cent, said the release. Income earned by way of long-term capital gains on transfer of the GDRs would also be taxed at the rate of 10 per cent, the release said.

The concessional tax rate which up to assessment year 2000-2001 was applicable in respect of income from GDRs issued to employees of companies engaged in information technology service has now been extended with respect to GDRs issued to employees of companies engaged in other knowledge based industry or service including entertainment service, pharmaceutical industry and biotechnology industry, it added.

The concessional rate would also be applicable now in respect of GDRs issued to employees of subsidiary companies. The issue of foreign currency convertible bonds and ordinary shares (through Depository Receipt Mechanism) Scheme 1993 has been specified for the purposes of Section 115 ACA under delegated legislation to the Finance Act, 2001 in respect of assessment year 2000-2001 and subsequent assessment years, the release said.