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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Business Restructuring

Narmada Infra Capital Ltd, an infrastructure capital company, issues a zero coupon bond. Under section 32(d) of the Income-tax Act, 2025, what is the 'discount' on the bond for deduction purposes?

Discount means the difference between the amount the issuer receives or is to receive on issue and the amount payable on maturity or redemption. A pro rata share, based on the bond's life from issue to maturity, is then allowed as a deduction under section 32(d).

  1. AThe difference between the amount received or receivable by the issuer and the amount payable on maturity or redemptionCorrect
  2. BThe difference between face value and the market price on the date of listing
  3. CThe annual interest rate multiplied by the period of life of the bond
  4. DThe difference between the amount payable on maturity and the issuer's cost of borrowing from banks

Explanation

Section 32(d)(i) defines discount as the difference between the amount received or receivable by the issuer and the amount payable on maturity or redemption. A pro rata portion of it, based on the period of life of the bond (issue date to maturity or redemption), is deductible. The other options use concepts not in the provision.

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