TAX TREATMENT IN INVESTORS HANDS -
October 1st, 2010
TAX TREATMENT IN INVESTORS HANDS:
In securitization transactions, the taxation of investors is a derivative of the taxation of the SPV.
There are uncertainty as to who would issue the certificate confirming the payment of principal and interest to enable the borrowers to claim tax concessions in case of securitization of housing loans.
There are uncertainties about the applicability of Tax Deducted at Source (TDS) to PTCs, treatment of interest tax post securitisation, etc. Some clarification from the Tax Authorities in this regard is required.
Transfer of a loan amount to conveyance and hence is subject to the stamp duty. As stamp duty on conveyance comes under the purview of the State, the stamp duty is different in different states.
High level of stamp duties would make the securitisation transaction uneconomical. Maharashtra, Gujarat, Tamilnadu, Karnataka and West Bengal have reduced the stamp duty payable on securitisation transactions involving some asset classes substantially in order to encourage the development of this instrument. In some of the other states, the incidence of stamp duty is as high as 13 - 14%.
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