CONSULTATION ON PROPOSED TREATMENT OF INDIAN LONG

Please refer to the disclaimer at the end of this document.

CONSULTATION ON PROPOSED

TREATMENT OF INDIAN LONG

TERM CAPITAL GAINS TAX IN THE

MSCI EQUITY INDEXES

September 2019

This consultation may or may not lead to the implementation of the proposed changes in the MSCI Indexes. Consultation feedback will

remain confidential. MSCI may publicly disclose feedback if specifically requested by specific market participants. In that case, the relevant

feedback would be published together with the final results of the consultation.

BACKGROUND & OBJECTIVE

In India, capital gains are taxed for securities including the ones which are received

as part of stock dividend.

▪ Long Term Capital gains are taxed at 10% (applicable on securities held for a period exceeding

12 months)**

▪ Short Term Capital gains are taxed at 15% (applicable on securities held for a period less than

12 months)

Currently, the methodology does not take into account tax on capital gains in the

MSCI Indexes.

For market neutral events such as stock dividend, Capital gains tax creates issue in

tracking and replicability of Indian securities in the MSCI Indexes.

** Long Term Capital gains tax is being levied since April 01, 2018.

STOCK DIVIDENDS POST LAW AMENDMENT (01-Apr-2018)

MSCI code

Name

Index Family

Ex date

Terms

92096.01

VARUN BEVERAGES

Small 25-Jul-19 S 1 : 2

23619.01

GAIL INDIA

Standard 9-Jul-19 S 1 : 1

32809.01

UPL

Standard 2-Jul-19 S 1 : 2

29933.01

BIOCON LTD

Standard

-Jun-

S 1 : 1

80359.01

SYNGENE INTERNATIONAL

Small

-Jun-

S 1 : 1

66472.01

TTK PRESTIGE

Small

-May-

S 1 : 5

30377.01

NTPC

Standard

-Mar-

S 1 : 5

22728.01

WIPRO

Standard 6-Mar-19 S 1 : 3

28126.01

CONTAINER CORP OF INDIA

Standard 4-Feb-19 S 1 : 4

33384.01

MOTHERSON SUMI SYSTEMS

Standard 30-Oct-18 S 1 : 2

33714.01

GODREJ CONSUMER PRDCTS

Standard

-Sep-

S 1 : 2

22734.01

INFOSYS

Standard 4-Sep-18 S 1 : 1

33371.01

KARUR VYSYA BANK

Small

-Aug-

S 1 : 10

67991.01

ASHOKA BUILDCON

Small 12-Jul-18 S 1 : 2

82000.01

MINDA INDUSTRIES

Small 11-Jul-18 S 2 : 1

60413.01

CITY UNION BANK

Small 10-Jul-18

S 1 : 10

60359.01

JYOTHY LABORATORIES

Small

-Jun-

S 1 : 1

63883.01

JUBILANT FOODWORKS

Small

-Jun-

S 1 : 1

22726.01

ESSEL PROPACK

Small

-Jun-

S 1 : 1

66495.01

GRUH FINANCE

Small 6-Jun-18 S 1 : 1

29344.01

TATA CONSULTANCY

Standard

-May-

S 1 : 1

*** Please note that this slide has been updated and replaces the earlier slide from September 09, 2019.

POTENTIAL IMPACT

Name Ex date

Index impact

(10%)

Index impact

(15%)

Index impact

(10%)

Index impact

(15%)

VARUN BEVERAGES

25-Jul-19 0.0000% 0.0000% 0.0000% 0.0000%

GAIL INDIA

9-Jul-19 0.0002% 0.0004% -0.0001% -0.0001%

UPL

2-Jul-19 0.0002% 0.0004% 0.0002% 0.0004%

BIOCON LTD

12-Jun-19 0.0001% 0.0001% 0.0000% -0.0001%

SYNGENE INTERNATIONAL

11-Jun-19 0.0000% 0.0001% 0.0000% 0.0000%

TTK PRESTIGE

-May-

0.0000% 0.0000% 0.0000% 0.0000%

NTPC

-Mar-

0.0001% 0.0002% 0.0000% 0.0000%

WIPRO

6-Mar-19 0.0002% 0.0003% 0.0002% 0.0003%

CONTAINER CORP OF INDIA

4-Feb-19 0.0000% 0.0001% -0.0003% -0.0004%

MOTHERSON SUMI SYSTEMS

30-Oct-18 0.0001% 0.0002% -0.0002% -0.0003%

GODREJ CONSUMER PRDCTS

12-Sep-18 0.0002% 0.0003% 0.0002% 0.0003%

INFOSYS

4-Sep-18 0.0027% 0.0040% 0.0019% 0.0029%

KARUR VYSYA BANK

14-Aug-18 0.0000% 0.0000% 0.0000% 0.0000%

ASHOKA BUILDCON

12-Jul-18 0.0000% 0.0000% 0.0000% 0.0000%

MINDA INDUSTRIES

11-Jul-18 0.0000% 0.0001% 0.0000% 0.0000%

CITY UNION BANK

10-Jul-18 0.0000% 0.0000% 0.0000% 0.0000%

JYOTHY LABORATORIES

28-Jun-18 0.0000% 0.0000% 0.0000% 0.0000%

JUBILANT FOODWORKS

21-Jun-18 0.0001% 0.0001% 0.0001% 0.0001%

ESSEL PROPACK

20-Jun-18 0.0000% 0.0000% 0.0000% 0.0000%

GRUH FINANCE

6-Jun-18 0.0001% 0.0001% 0.0001% 0.0001%

TATA CONSULTANCY

-May-

0.0018% 0.0026% 0.0010% 0.0014%

Total Impact

0.0060%

0.0090%

0.0031%

0.0047%

Name Ex date

Index impact

(10%)

Index impact

(15%)

Index impact

(10%)

Index impact

(15%)

GAIL INDIA

9-Jul-19 0.0133% 0.0199% -0.0042% -0.0063%

UPL

2-Jul-19 0.0130% 0.0195% 0.0130% 0.0195%

BIOCON LTD

-Jun-19 0.0041% 0.0062% -0.0021% -0.0032%

NTPC

-Mar-

0.0061% 0.0091% -0.0003% -0.0005%

WIPRO

6-Mar-19 0.0126% 0.0189% 0.0106% 0.0159%

CONTAINER CORP OF INDIA

4-Feb-19 0.0027% 0.0040% -0.0152% -0.0227%

MOTHERSON SUMI SYSTEMS

-Oct-

0.0068% 0.0102% -0.0098% -0.0147%

GODREJ CONSUMER PRDCTS

-Sep-

0.0123% 0.0185% 0.0105% 0.0157%

INFOSYS

4-Sep-18 0.1459% 0.2189% 0.1056% 0.1584%

TATA CONSULTANCY

-May-

0.0982% 0.1473% 0.0536% 0.0804%

Total Impact

0.3151%

0.4726%

0.1617%

0.2425%

Assumptions:

✓ Both original and bonus shares are sold on ex-date.

✓ 10% applied as per Long term capital gains tax rate

✓ 15% as per Short term capital gains tax rate

Scenario 1:

Impact calculated assuming tax is paid only on the bonus share.

Gain/Loss on original share is not considered.

Scenario 2:

Impact calculated based on net gain calculated if original and bonus

shares are sold together.

MSCI ACWI IMI

MSCI INDIA

PROPOSAL

▪ In order to account for capital gains tax, MSCI is proposing to apply a

withholding tax of 10% on the ex-date of stock dividend for securities listed

in India.

▪ This tax of 10% will be applied only in case of stock dividend of new shares

in the same company.

▪ MSCI proposes to make an adjustment to the MSCI Net Daily Total Return

(DTR) Indexes to reflect this withholding tax. This adjustment will be

reflected simultaneously with the Price Adjustment Factor (PAF) on the ex-

date of the stock dividend.

DISCUSSION POINTS

▪ Do you agree that MSCI should apply a withholding tax (WHT) for stock

dividends of Indian securities?

▪ Is it a concern that this proposal would only impact stock dividend of shares

of the same company and will not impact distribution of other type of asset

(bonds, warrants etc.) or shares in other company (including spin-offs).

▪ In case of withholding tax to be applied, should MSCI apply a tax of 10% or

15% for stock dividends?

• MSCI is a leading provider of critical decision support tools and

services for the global investment community. With over 45 years of

expertise in research, data and technology, we power better

investment decisions by enabling clients to understand and analyze

key drivers of risk and return and confidently build more effective

portfolios. We create industry-leading research-enhanced solutions

that clients use to gain insight into and improve transparency across

the investment process. To learn more, please visit www.msci.com.

About MSCI

AMERICAS EUROPE, MIDDLE EAST

& AFRICA

ASIA PACIFIC

Americas +1 888 588 4567 * Cape Town + 27 21 673 0100 China North 10800 852 1032 *

Atlanta + 1 404 551 3212 Frankfurt + 49 69 133 859 00 China South 10800 152 1032 *

Boston + 1 617 532 0920 Geneva + 41 22 817 9777 Hong Kong + 852 2844 9333

Chicago + 1 312 675 0545 London + 44 20 7618 2222 Mumbai + 91 22 6784 9160

Monterrey + 52 81 1253 4020 Milan + 39 02 5849 0415 Seoul 00798 8521 3392 *

New York + 1 212 804 3901 Paris 0800 91 59 17 * Singapore 800 852 3749 *

San Francisco + 1 415 836 8800 Sydney + 61 2 9033 9333

São Paulo + 55 11 3706 1360 Taipei 008 0112 7513 *

Toronto + 1 416 628 1007 Thailand 0018 0015 6207 7181 *

Tokyo +81 3 5290 1555

• = toll free

msci.com

clientservice@msci.com

This document and all of the information contained in it, including without limitation all text, data, graphs, charts (collectively, the “Information”) is the property of MSCI Inc. or its subsidiaries (collectively, “MSCI”), or MSCI’s licensors, direct or indirect suppliers or any third party involved

in making or compiling any Information (collectively, with MSCI, the “Information Providers”) and is provided for informational purposes only. The Information may not be modified, reverse-engineered, reproduced or redisseminated in whole or in part without prior written permission

from MSCI.

The Information may not be used to create derivative works or to verify or correct other data or information. For example (but without limitation), the Information may not be used to create indexes, databases, risk models, analytics, software, or in connection with the issuing, offering,

sponsoring, managing or marketing of any securities, portfolios, financial products or other investment vehicles utilizing or based on, linked to, tracking or otherwise derived from the Information or any other MSCI data, information, products or services.

The user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. NONE OF THE INFORMATION PROVIDERS MAKES ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE INFORMATION (OR THE

RESULTS TO BE OBTAINED BY THE USE THEREOF), AND TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH INFORMATION PROVIDER EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF

ORIGINALITY, ACCURACY, TIMELINESS, NON-INFRINGEMENT, COMPLETENESS, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE) WITH RESPECT TO ANY OF THE INFORMATION.

Without limiting any of the foregoing and to the maximum extent permitted by applicable law, in no event shall any Information Provider have any liability regarding any of the Information for any direct, indirect, special, punitive, consequential (including lost profits) or any other damages

even if notified of the possibility of such damages. The foregoing shall not exclude or limit any liability that may not by applicable law be excluded or limited, including without limitation (as applicable), any liability for death or personal injury to the extent that such injury results from the

negligence or willful default of itself, its servants, agents or sub-contractors.

Information containing any historical information, data or analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. Past performance does not guarantee future results.

The Information should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. All Information is impersonal and not tailored to the needs of

any person, entity or group of persons.

None of the Information constitutes an offer to sell (or a solicitation of an offer to buy), any security, financial product or other investment vehicle or any trading strategy.

It is not possible to invest directly in an index. Exposure to an asset class or trading strategy or other category represented by an index is only available through third party investable instruments (if any) based on that index. MSCI does not issue, sponsor, endorse, market, offer, review

or otherwise express any opinion regarding any fund, ETF, derivative or other security, investment, financial product or trading strategy that is based on, linked to or seeks to provide an investment return related to the performance of any MSCI index (collectively, “Index Linked

Investments”). MSCI makes no assurance that any Index Linked Investments will accurately track index performance or provide positive investment returns. MSCI Inc. is not an investment adviser or fiduciary and MSCI makes no representation regarding the advisability of investing in

any Index Linked Investments.

Index returns do not represent the results of actual trading of investible assets/securities. MSCI maintains and calculates indexes, but does not manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities

underlying the index or Index Linked Investments. The imposition of these fees and charges would cause the performance of an Index Linked Investment to be different than the MSCI index performance.

The Information may contain back tested data. Back-tested performance is not actual performance, but is hypothetical. There are frequently material differences between back tested performance results and actual results subsequently achieved by any investment strategy.

Constituents of MSCI equity indexes are listed companies, which are included in or excluded from the indexes according to the application of the relevant index methodologies. Accordingly, constituents in MSCI equity indexes may include MSCI Inc., clients of MSCI or suppliers to

MSCI. Inclusion of a security within an MSCI index is not a recommendation by MSCI to buy, sell, or hold such security, nor is it considered to be investment advice.

Data and information produced by various affiliates of MSCI Inc., including MSCI ESG Research LLC and Barra LLC, may be used in calculating certain MSCI indexes. More information can be found in the relevant index methodologies on www.msci.com.

MSCI receives compensation in connection with licensing its indexes to third parties. MSCI Inc.’s revenue includes fees based on assets in Index Linked Investments. Information can be found in MSCI Inc.’s company filings on the Investor Relations section of www.msci.com.

MSCI ESG Research LLC is a Registered Investment Adviser under the Investment Advisers Act of 1940 and a subsidiary of MSCI Inc. Except with respect to any applicable products or services from MSCI ESG Research, neither MSCI nor any of its products or services recommends,

endorses, approves or otherwise expresses any opinion regarding any issuer, securities, financial products or instruments or trading strategies and MSCI’s products or services are not intended to constitute investment advice or a recommendation to make (or refrain from making) any

kind of investment decision and may not be relied on as such. Issuers mentioned or included in any MSCI ESG Research materials may include MSCI Inc., clients of MSCI or suppliers to MSCI, and may also purchase research or other products or services from MSCI ESG Research.

MSCI ESG Research materials, including materials utilized in any MSCI ESG Indexes or other products, have not been submitted to, nor received approval from, the United States Securities and Exchange Commission or any other regulatory body.

Any use of or access to products, services or information of MSCI requires a license from MSCI. MSCI, Barra, RiskMetrics, IPD and other MSCI brands and product names are the trademarks, service marks, or registered trademarks of MSCI or its subsidiaries in the United States and

other jurisdictions. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and Standard & Poor’s. “Global Industry Classification Standard (GICS)” is a service mark of MSCI and Standard & Poor’s.

Notice & disclaimer