India’s First Fixed Income ETF Could Be Launched in December 2019

According to reports, India’s first fixed income Exchange Traded Fund (ETF) of Public Sector Units (PSUs) could be launched by the government in December 2019.

The ETF which shall contain debt securities of various state-run companies is expected to amount to Rs.15,000-Rs.20,000 crore.

The Exchange Traded Fund would only include AAA-rated papers issued by the PSUs. While most fixed bank deposits only offer a post-tax return of around 5.5%, the ETFs are expected to provide a higher rate of return of more than 7%.

Also Read: State Bank of India Slashes Deposit and Lending Rates

According to sources, the launch will also include ETFs of large central public sector enterprises. At present, there are only two securities based ETF apart from a few gold and equity ETFs in the country.

With the launch of the fixed income ETFs, the government expects an increase in the investor base in the years to come.

As far as taxation is concerned, the debt ETFs would be taxable in line with that of debt mutual funds.

For any clarifications/feedback on the topic, please contact the writer at viswanathan.v@cleartax.in

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