Taxation of returns from Equity linked capital protected debentures

POSTED BY subraindia2000 ON April 17, 2014 8:14 am ONE COMMENT

I subscribed to the above product in Aug 2011 with an investment of Rs 100000 for 1 debenture.
The returns were linked to variations in NIFTY stock index over 24 months. In the event of NIFTY plunging by more than 27.5%, then on redemption I would have received my investment of Rs 100000 back(i e capital Protected). Other wise there was no guaranteed return. Since NIFTY index performed better, I have received a maturity value of Rs 130000  on Nov 13. The product appears to be a capital protection product, though not named so.
The investment has given me a return of Rs 30000, over 2 years.
Pl clarify the tax liability for this return for AY 2014-15 and how the instrument is classified for tax purposes. Can this be treated as long term capital gain, and whether indexation benefit can be taken for this gain. ( The information was not given in the leaflet given to me  at the time of investment, though the person stated then that it is a Debt product)

One reply on this article “Taxation of returns from Equity linked capital protected debentures”

  1. ashalanshu says:

    Dear Subra, the debentures are classified as Debt products and gains to you are LTCG. You can calculate your indexed/non indexed LTCG and pay tax accordingly.



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