Niti Aayog pushes for policy push, tax sops to take corporate bond mkt to Rs 120 lakh crore, ETCFO
The Niti Aayog suggested a slew of policy and regulatory interventions including tax concessions, such as creating a special window or extending benefits under 80C to corporate bonds, equalising long-term capital gains treatment across asset classes and lowering withholding tax for foreign investors to transform India’s corporate bond market into a ₹100–120 lakh crore segment by 2030.
The report on deepening the corporate bond market, released by Aayog chief executive officer BVR Subramanian, argues that India cannot achieve its Viksit Bharat 2047 ambition without a financial system capable of mobilising long-term, low-cost capital, and that a deep and diversified corporate bond market is indispensable for that transition. It suggested a three-phased approach to deepen the market.
Taxation reforms are essential to treating bonds as mainstream wealth-building tools and correcting distortions that currently favour equities and bank deposits, it said.
The report calls for parity in withholding tax treatment between corporate bonds and securitised debt instruments, and suggests extending capital gains tax deferral rules to limited liability partnerships and direct asset transfers in real estate and infrastructure investment trust structures to enhance liquidity.
For foreign portfolio investors, the document proposes lower or exempted withholding tax on interest income, along with streamlined rules and a more predictable tax regime through international financial services centres such as GIFT City, measures it says would significantly boost offshore participation in rupee debt.
“Strengthening the corporate bond market demands continued reform in market infrastructure, risk management tools, investor diversification and credit enhancement mechanisms,” Subramanian said. Deepening these reforms will not only catalyse private sector investment but also align financial development with the nation’s strategic goals of inclusive, sustainable, and technology-driven growth, he added.
Over the past decade, India has made commendable strides in expanding its debt market infrastructure and regulatory framework, but compared to global peers, the country has not yet fully tapped its vast potential, he said, while releasing the report.
The market now accounts for around 15-16% of GDP, a considerable improvement, though still well below the levels seen in countries like South Korea, Malaysia, or China.
The recommendations presented, the report said, are not merely incremental improvements but part of a comprehensive strategy to make India’s corporate bond market globally competitive, resilient, and inclusive.
Implemented in a phased and coordinated manner, these reforms would not only address shortterm frictions but also build the institutional depth required for sustainable long-term development, it added.
In the initial phase, the report said, focus should be on streamlining regulations and procedures, enhancing coordination among regulators, and improving legal clarity.
Simultaneously, it said, strengthening market infrastructure, through digital access, reliable credit ratings and robust trading platforms, will lay the foundation for broader adoption and improved liquidity.
