Zero Coupon Bond [Section 2(48)]

 

Zero Coupon Bond means a bond —

(i) Issued By: (I) Any Infrastructure Capital Company, or (ii) Infrastructure Capital Fund, or (iii) Public

Sector Company.
(ii) Issue Date: On or after 01.06.2006.
(iii) Payment/Benefit: No payment and benefit Is received or receivable before maturity or redemption from
Infrastructure Capital Company / Infrastructure Capital. Fund/Public Sector Company, and
(iv) Notified by Central Government: The Central Government may, by notification In the Official Gazette,
specify in the behalf.
b. Treatment in the hands of Issuer u/s 36(1) (ilia) : Discount on Zero Coupon Bonds.
(i) Is the difference between Maturity / Redemption Value and the issue price.
(ii) Can be written off on a pro-rata basis over the period of the bond.
c. Treatment in the hands of Investor :
(i) Financial Asset: Zero Coupon Bond is a Financial Asset for the purpose of Capital Gains.
(ii) Taxability: Transfer or Maturity of Zero Coupon Bond will be taxable as Capital Gains.

Infrastructure Capital Company and Infrastructure Capital Fund for the purpose of Zero Coupon Bonds.
a) Infrastructure Capital Company [Sec.2 (26A)] : It Is a Company which makes investment by way of
acquiring shares or providing long-term finance to any prescribed enterprise or undertaking.
b) Infrastructure Capital Fund [Sec.2 (26B)] : It is a Fund operating under a Trust Deed established to raise
monies by Trustee for investment by way of acquiring shares or providing long-term finance to any
prescribed enterprise or undertaking.
c) Prescribed Undertaking/Enterprise :
(i) Enterprise/Undertaking wholly engaged in the infrastructure business referred in Sec. 80-IA/80-IAB,
or
(ii) Housing Projects referred in Section 80-IB, or
(iii) Project for constructing a Hotel (atleast of 3 Star Category) or Hospital with one hundred beds for
patients.

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