New Delhi: The government should remove tax deduction at source (TDS) norm for the bonds floated by companies in order to strengthen the corporate bond market, industry body Confederation of Indian Industry said on Monday.
"The debt market plays a pivotal role in emerging economies which require huge amounts of capital and resources to finance industry...Bond markets are critical to support India's high growth aspirations," the industry body said in a statement.
In India, secondary market transactions have increased seven fold between 2007 and 2010. The potential for growth of the corporate bond market is huge as the ratio of corporate debt to GDP, as of 2010, was only 5 percent compared with 10 percent in China, 42 percent in Japan and 129 percent in the US, it said.
The CII said: "tax deduction at source, even on non-resident investors, should be removed completely".
It demanded to raise tax incentives for investment in corporate bond, including deduction from taxable income from infrastructure bonds.
There should be simplified debt listings and investor base should be increased by expanding types of instruments and exposure limit of such entities for institutional investors.
"For retail investors, debentures should be removed from purview of public deposits," it said.
For overseas investors, restrictions in investment by FIIs in debt window auction and allocation should be done away with it said.