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Nifty 50: Market-linked debentures are gaining popularity among debt products. Are they tax-efficient?

Written by News Sateek

The concept of Muhbit-ul-Haq.

Summary

Market linked debentures are like zero-coupon debt instruments, where the payoff is dependent on the linked index. Their tax treatment, although complex, can provide investors with better after-tax returns than ordinary vanilla debt securities.

Lower interest rates have left very few doors for debt investors to knock on. Previously, an ‘attractive’ way to offset compression in yield was to climb down the rating curve. But after the credit-stress events, investors are looking for a new game in town, such as market-linked debentures (MLDs). The payoff in MLD is dependent on a reference security or an index. If any MLD is linked to Nifty 50, then the interest payable will be

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News Sateek

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