Govt announces 5% tax rate on interest paid to non-resident in relation to rupee-denominated bonds
By TIOL News Service
NEW DELHI, SEPT 17, 2018: INTEREST payable by an Indian company or a business trust to a non-resident, including a foreign company, in respect of rupee denominated bond issued outside India before the July 1, 2020 is liable for concessional rate of tax of 5%. Consequently, Section 194LC of the Income-tax Act, 1961 provides for the deduction of tax at a lower rate of five percent on the said interest payment.
Consequent to review of the State of Economy on September 14, 2018, the Finance Minister, Mr Arun Jaitley, had announced a Multi-pronged Strategy to contain the Current Account Deficit (CAD) and augment the Foreign Exchange Inflow. In this background, Low Cost Foreign Borrowings through Off-shore Rupee Denominated Bond have been further incentivised to increase the foreign exchange inflow.
Accordingly, it has been decided that interest payable by an Indian company or a business trust to a non-resident, including a foreign company, in respect of Rupee Denominated Bond issued outside India during the period from September 17, 2018 to March 31, 2019 shall be exempt from tax, and consequently, no tax shall be deducted on the payment of interest in respect of the said Bond under Section 194LC of the Act.
Legislative amendments in this regard shall be proposed in due course.
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