INDIA Law and Practice Contributed by: Utsav Johri, Sucheta Bhattacharya and Nishal Makharia, JSA Advocates & Solicitors
against profits and gains of any business or profession carried out for up to eight assessment years, subject to the limits mentioned. Interest payments made to associated enterprises would also be subject to the arm’s length test under the Indian transfer pricing provisions. Please note that, as of 1 April 2026, the Income Tax Act of 1961 has been replaced by the Income Tax Act, 2025, which may have changes pertaining to certain provisions of direct taxation, as set out above. Double taxation avoidance agreements in India pre - vent taxpayers from being taxed twice on the same income in two countries, including private credit investors. They promote cross-border investment by overseas investors by providing reduced withholding tax rates on interest and other income. Certain tax benefits are prescribed for investments made at the fund level – ie, the taxes are to be paid by an AIF in an International Financial Service Cen - tre. FPIs are also subject to tax based on a special tax regime that applies to them where securities held by FPIs are treated as capital assets. AIFs can ben - efit from an exemption from tax on income in certain cases. 5. Guarantees and Security 5.1 Assets and Forms of Security The following assets are typically provided as security in private credit transactions. • Security over immovable property, such as land and buildings, is taken in the form of a mortgage. The most common forms of mortgage are an English mortgage (a registered mortgage), a simple mortgage (a registered mortgage) and an equitable mortgage (a mortgage created by depositing the title deeds, which is registerable in certain states). • Security over shares and other securities is typical - ly created by way of a pledge. Pledges on securi - ties are created pursuant to a pledge agreement. • Movable property such as receivables, plant and machinery and stock, cash deposits and bank
accounts is usually secured by way of hypotheca - tion. Hypothecation is a charge over any movable property, existing or future, created by a borrower in favour of a creditor. Such security is created in terms of a deed of hypothecation. The following perfection requirements apply to the creation of security. • Registration under the Indian Registration Act, 1908 (Registration Act): any mortgage of immov - able property, other than an equitable mortgage created by way of the deposit of title deeds of the mortgaged property, is required to be registered in accordance with the Registration Act within four months of the execution of the mortgage deed. Where the mortgage is an equitable mortgage of immovable property, registration requirements will depend on the state where the immovable property is situated. • Registration with Central Registry of Securitisa - tion Asset Reconstruction and Security Interest (CERSAI): mortgages and hypothecation are also registered with CERSAI. This registration must be done by the lender or the security trustee. • Filing with the Registrar of Companies (ROC): a mortgage, lien, charge, pledge, hypothecation or any other security interest created by an Indian company over its assets located in India or abroad is required to be registered with the relevant reg - istrar of companies. The ROC issues a certificate of charge upon completion of such registration. A charge is not taken into account by the liquidator or any creditor of the company unless it is regis - tered with the ROC and a certificate of registration of the charge is issued by the ROC. • Filing with information utilities: details of any mortgage, lien, charge, pledge, hypothecation or any other security interest created by an Indian company over its assets located in India or abroad is required to be filed with the relevant information utility in accordance with the Insolvency and Bank - ruptcy Board of India (Information Utility) Regula - tions, 2017. • Other formalities: depending on the asset provided as security (such as intellectual property, ships and aircraft), further registration or filings with the relevant government authority may be required.
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