FAQs

Question

In TASIS norms, why is a 7.5% return on Interest-based Investments added to Interest Income to ascertain the compliance of the company on the Interest norm?

Answer

The reporting conventions in India do not allow one to clearly capture all income arising as, or from interest, as “interest income”. Many money market instruments and units of liquid or income oriented mutual funds, provide returns to their investors, which arise either from interest or from trading of essentially interest-earning instruments. However, due to the nature of the instruments, the return yielded to the investor is referred to as a “dividend” or “profit on sale of investments” (which could also arise on sale of equities) rather than as “interest,” in company accounts. Hence it is essential to involve an additional subsidiary factor based on Interest-based Investments to ensure that companies with earnings from interest reported as dividends or profit on sale of interest-based investments, do not escape evaluation. Hence, TASIS adds an additional 7.5% of Interest-based Investment to the reported Interest Income to derive the Total Interest Income.