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issued by international depositories(ODB), and they represent an interest in the underlying shares held by them in the issuer company(Indian company). The shares are usually held by a domestic custodian on behalf of the depositories and the depositories in turn issue the depository receipts, which entitle the holder of the receipts to get the underlying shares on demand.
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represent an interest in the underlying securities, are in turn securities that are capable of being listed on international stock exchanges They can be converted into ordinary shares of issuing company
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Issui n g
Domestic Custodian bank Investment Banker (overseas depository Bank) issuer Of ADR/ GDR
co m p a n y Trac k re co rd of 3 y e ar s www.professoraugustin.com
1.Public 2.Private 3.Number of ADR/GDR 4.Issue price 5.Rate of Interest 6.conversion Price 7.coupon Rate Pricing of conversion option
Conditions
currency bonds) Ordinary shares of issuing company should be in Indian currency The issued ordinary shares or bonds should be delivered to DCB(Domestic custodian bank) DCB instructs ODB(Overseas depository Bank) to issue GDR/ADR certificates to non- resident investors against the shares in DCB GDR may be listed on any international www.professoraugustin.com stock exchange for trading outside India.
FCCB- in foreign currency(Foreign
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equity capital in the international market through the issue of GDR/ADRs/FCCBs. These are not subject to any ceilings on investment. An applicant company seeking Government's approval in this regard should have a consistent track record for good performance (financial or otherwise) for a minimum period of 3 years
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Advantages of ADR/GDR
1. Can be listed on any of the overseas
stock exchanges/OTC/Book entry transfer system 2.Freely transferable by non resident 3.They can be redeemed by ODB 4.The ODB should request DCB to get the corresponding underlying shares released in favour of non resident investors.(Share holder of issuing company)
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Capital gain
Bombay Stock Exchange or NSE on the date of conversion of ADR/GDR into shares. From the date of conversion into shares till the date of sale is more than 12 months-long term capital asset-10% tax Less than 12 months-short term normal rate of tax. All trading transaction outside India by non-resident-not taxable in India www.professoraugustin.com
Sale price of shares- conversion price Conversion price= price of shares at
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custodian bank and before they are sold by nonresident to resident-concesstional treatments applicable It is also applicable for the dividend and received or capital gain on transfer of underlying shares.
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with ODB exempted from WEALTH TAX . If they are gifted to nonresident-not treated as income of the recipient. If gifted to resident- treated as income of the recipient.
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Taxation
1. Dividend- Taxed AT THE RATE OF 10% The issuing company should transfer the
net dividend (after TDS at 10%) to ODB ODB distribute them to Non-residents proportionately to their holdings. Credit also be given
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