The Government has proposed a targeted tax exemption for the Bank for International Settlements (BIS) in respect of investments made in Indian Government Securities through a specified INR-denominated BIS Investment Pool (BISIP). BIS, an international financial institution owned by central banks, facilitates monetary and financial cooperation and manages investment products for central banks and official monetary authorities. Under the proposed ordinance, BIS will be exempt from tax on interest income earned from Government Securities and capital gains arising from their transfer or redemption. The exemption is narrowly tailored and applies only to income generated from investments in Government Securities through the designated investment pool, and not to other BIS operations or income in India. The measure seeks to align BIS with other international institutions and entities that already enjoy tax exemptions under Indian tax laws. Although BIS has not yet invested in Indian Government Securities, the proposal is expected to encourage future participation and strengthen India’s appeal as a destination for sovereign debt investments.
FREQUENTLY ASKED QUESTIONS (FAQs) ON BIS EXEMPTION
1. What is the Bank for International Settlements (BIS)?
Ans: The BIS is an international financial institution owned by central banks and serves as a forum for monetary and financial cooperation among central banks globally. It also acts as a banker and asset manager for central banks and international organizations.
2. What is BISIP?
Ans: BISIP refers to the BIS Investment Pool which is a suite of collective investment schemes and fixed-income products managed by the Bank for International Settlements (BIS). It is designed exclusively to help central banks and official monetary authorities globally manage their foreign exchange reserves, diversify their portfolios, and access specific asset classes.
3. What are the changes proposed in the present ordinance?
Ans: The following income of BIS are proposed to be exempted:
- Interest income earned from Government Securities; and
- Capital gains arising on transfer or redemption of Government Securities.
4. Would all income earned by BIS in India be eligible for exemption?
Ans: No. This exemption is restricted to income in the nature of interest and capital gains arising from investments in Government Securities through the specified INR-denominated investment pool and not to other BIS operations or income in India.
5. What is the current levels of investments from BIS in G-Secs?
Ans: BIS is yet to invest in India.
6. Are there other international entities like BIS which have similar exemption in the Act?
Ans Such entities are –
i. European Economic Community – Income by way of interest, dividend or capital gains from investment made;
ii. Central bank of any country – Interest income on deposits made with scheduled banks with RBI approval
iii. Nordic Investment bank (Multilateral financial institution) – Interest income on specified loans
iv. European Investment bank — Interest income on specified loans
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