Online published on 17 April, 2012.
IDRs are a significant step towards the internationalization of the Indian Security Markets. While there is an effort on the part of the Government to offer a possible diversification of markets and geographical risk, the potential of this instrument (IDR) may not be realized till the Government addresses several issues which are acting as a barrier. The present legal framework does not permit fungibility but only redemption that too after one year from the date of closing of issues and also only if the IDRs are infrequently traded on the Stock Exchange (s) in India. It is clear that the process of conversion of IDRs into underlying equity shares is very lengthy and cumbersome. The tax treatment in IDR is not on par with other securities. It is widely perceived that the investment in IDR is not a very tax friendly instrument. The author has thrown light on these aspects through a perspective study based on secondary sources.
