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In today's show, we will be talking about the changes in taxation for income generated from Market Linked Debentures or MLDs announced as per Budget 2023.In the world of investments, investors typically evaluate products based on their risk-return profile and how they fit in with their existing portfolio. However, tax considerations also play a crucial role.Unlike normal debentures, which offer a fixed rate of interest at a defined frequency, MLDs generate returns linked to a market instrument like the Nifty 50 index/G-Sec Index. The returns from MLDs vary based on the performance of the external benchmark, and the return on MLDs is paid at the end of its tenor along with the principal valueUnder the recent Budget 2023 proposals, there have been changes in the taxation of income generated from Market Linked Debentures (MLDs). Previously, MLDs were taxed at a flat rate of 10% if held for more than 12 months. However, as per the new proposals, the income from MLDs will now be taxed at the investor's slab rate.This is why MLDs were a popular investment option for HNIs, as they enjoyed a lower tax of 10% if held for more than a year. However, with the new proposals, the tax benefits of investing in MLDs have diminished, which could impact their popularity among investors.With the recent regulatory change, many investors who have completed 1 year of holding but still have some time to maturity are looking to sell their MLDs as they have a limited window to take advantage of the tax arbitrage. This selling pressure and the demand-supply mismatch is expected to present itself in the form of higher yields on these papers.This presents an opportunity for investors with surplus liquidity to deploy in these MLDs at significantly high yields for a short time period. The high yields are an effect of a regulatory change and not a structural issue within the underlying entity, thereby getting a better price for the credit risk.To re-iterate today's episode is on the recent change in MLD taxation. However, for any tax related advice please consult your tax advisorsDisclaimer: Please note that this podcast has been created for educational purpose only. The views and opinions expressed in the podcast should not be construed as a recommendation or an investment advice.