Insertion of new section 194LC.
74. After section 194LB of the Income-tax Act, the following section shall be inserted with effect from the 1st day of July, 2012, namely:—
Income by way of interest from Indian company engaged in certain business.
‘194LC. (1) Where any income by way of interest referred to in sub-section (2) is payable to a non-resident, not being a company or to a foreign company by a specified company, the person responsible for making the payment, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct the income-tax thereon at the rate of five per cent.
(2) The interest referred to in sub-section (1) shall be the income by way of interest payable by the specified company,—
(i) in respect of monies borrowed by it at any time on or after the 1st day of July, 2012 but before the 1st day of July, 2015 in foreign currency, from a source outside India under a loan agreement approved by the Central Government in this behalf; and
(ii) to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment.
Explanation.—For the purpose of this section—
(a) “foreign currency” shall have the meaning assigned to it in clause (m) of section 2 of the Foreign Exchange Management Act, 1999; (42 of 1999.)
(b) “specified company” means an Indian company engaged in the business of—
(i) generation or distribution or transmission of power; or
(ii) operation of aircraft; or
(iii) manufacture or production of fertilizers; or
(iv) construction of road including toll road or bridge; or
(v) construction of port including inland port; or
(vi) construction of ships in a shipyard; or
(vii) construction of dam; or
(viii) developing and building a housing project as referred to in sub-clause (vii) of clause (c) of sub-section (8) of section 35AD.’.
Notes on Clauses:
Clause 74 of the Bill seeks to insert a new section 194LC in the Income-tax Act, relating to income by way of interest from Indian company engaged in certain business.
The proposed new section 194LC provides that where any income by way of interest is payable to a non-resident, not being a company or to a foreign company by a specified company, the person responsible for making the payment shall deduct income-tax thereon at the rate of five per cent. at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
It further provides that the interest shall be income by way of interest payable by the specified company in respect of any monies borrowed by it at any time on or after the 1st day of July, 2012 but before the 1st day of July, 2015; in foreign currency, from a source outside India under a loan agreement approved by the Central Government in this behalf; to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment.
It also defines the expressions “foreign currency” and “specified company” for the purpose of the aforesaid section.
This amendment will take effect from 1st July, 2012.
