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Structured Products

Structured Products

What are Structured Products?

  • Structured Products are NCDs which are issued in Demat form and are linked to NIFTY Index, also called Nifty Linked Debentures, Market Linked Debentures or in general Structured Products
  • Products come with pre-defined payoffs with respect to underlying asset that is NIFTY index performance
  • Like all other debt related investments, Structured Products also have a Credit Risk
  • The strength of a Structured Product lies in its flexibility and tailored approach to investing
  • Returns are in form of coupon which is paid lump sum at maturity along with Principal amount if not redeemed before maturity

Taxation on Structured Products

1. If Structured Product to be Held till Maturity:

Unlisted – On Maturity of NCD, NBFC will give back principal plus interest, where TDS of 10% if PAN mentioned in DP, else 20% if PAN number not specified in DP applicable would be deducted on Interest.

Listed – On Maturity of NCD, NBFC will give back principal plus interest, where TDS of 10% would be deducted on Interest.

2. If Structured Product exited before Maturity: (2 Scenarios)

Selling it to third party, here again two scenarios:

i. Unlisted –

  1. Selling before 36 months, it is short term capital Gain, taxed as per tax slab rate
  2. Selling after 36 months, it is Long term Capital Gain where taxed @ 20% without indexation benefit

ii. Listed –

  1. Selling before 12 months, it is short term capital Gain, taxed as per tax slab rate
  2. Selling after 12 months, it is Long term Capital Gain where taxed @ 10% without indexation benefit

What are the benefits of Structured Products?

  • Structured Products provide investors with an appropriate repayment profile that makes satisfactory yields possible in growing, sinking or sideways-moving markets
  • Investors receive qualified advice in selecting an appropriate risk profile and that they have a clear understanding of how the product of their choice functions, hence being a Plan B to the Portfolio
  • Hence by any measure, Structured Products are an innovative alternative to traditional forms of investment such as stocks and bonds wherein there is a mechanized way of functioning
  • It is easier access to new markets that in the past were open only to institutional investors, such as raw materials or growing economies. It also has a diversified approach

FAQs

1. What are Structure Products

Nifty Link debentures

2. Early EXIT

Only after one year possible

3. EXIT LOAD

Not Applicable

Can NRI invest in Structured Products

NRI is not allowed to invest in Structured Products

5. Minimum Investment

1 Crore

6. Lock in Period

1 Year

7. Interest receipt to client

lump sum on either early exit or maturity