The Securities and Exchange Board of India () has proposed to expand the scope of online bond platform providers (OBPPs), potentially allowing them to offer products regulated by the International Financial Services Centres Authority (IFSCA) alongside specific tax-saving bonds.
Currently, these platforms are restricted to securities regulated by domestic entities, such as , the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (IRDA), and Pension Fund Regulatory and Development Authority (PFRDA).
The new framework seeks to bridge the gap regarding IFSCA-regulated services, proposing that OBPPs operate within the GIFT-IFSC in a manner similar to Sebi-registered stockbrokers.
“In view of the request made by IFSCA and to promote ease of doing business, it is proposed that OBPPs may be permitted to offer products or securities or services regulated by IFSCA, in compliance with applicable guidelines under the Foreign Exchange Management Act (FEMA), 1999, including Overseas Investment Rules and limits under the Liberalised Remittance Scheme (LRS),” Sebi said in its consultation paper.
Furthermore, the market regulator aims to permit the offering of bonds under Section 54EC of the Income Tax Act, 1961, and Section 85 of the upcoming Income-tax Act, 2025.
The move is designed to improve the ease of doing business and provide greater clarity on permissible investment products.
Sebi highlighted that 54EC bonds issued by government-backed entities like REC, Power Finance Corporation, and Indian Railways Finance Corporation offer essential capital gains tax exemptions.
To protect retail participants, the regulator suggested that platforms must disclose critical bond features, including investment caps, lock-in periods, and non-transferability.
Additionally, OBPPs must feature prominent disclaimers clarifying that these specific tax-saving instruments fall outside Sebi’s grievance redressal purview, directing investors to the issuers for any disputes.
In another significant shift, Sebi proposed aligning compliance officer mandates for OBPPs with standard stockbroker regulations. This would replace the strict requirement for a company secretary with a broader framework under the Sebi (Stock Brokers) Regulations, 2026. The adjustment follows feedback from bodies like the Institute of Chartered Accountants of India (ICAI), which advocated more flexibility and regulatory uniformity.
These initiatives represent Sebi’s commitment to streamlining the bond market ecosystem and enhancing operational efficiency for digital platforms. By expanding the variety of available securities and simplifying administrative roles, the regulator hopes to foster a more robust secondary market. The Securities and Exchange Board of India has invited public feedback on these proposals, with a submission deadline set for 26 May.
What is a tax-saving bond?
Tax-saving bonds represent specialized government-issued financial instruments designed to incentivize long-term savings through investor tax incentives. Specifically, 54EC Bonds allow individuals to defer taxes on recent long-term capital gains. However, any interest accrued remains taxable based on the participant’s specific income bracket. These securities feature mandatory lock-in periods; consequently, attempting to redeem or liquidate holdings before this timeframe expires will result in the forfeiture of all associated tax benefits.