Amendment of section 194LC
43. In section 194LC of the Income-tax Act, in sub-section (2) with effect from the 1st day of June,2013,––
(a) after sub-clause (ii) and before the Explanation, the following proviso shall be inserted, namely:—
“Provided that where a non-resident (not being a company) or a foreign company has deposited any sum of money in foreign currency in a designated account through which such sum, as converted in rupees, is utilised by the non-resident or the foreign company, as the case may be, to subscribe to any long-term infrastructure bonds issued by the specified company in India, then, such borrowing, for the purposes of this section, shall be deemed to have been made by the specified company in foreign currency.”;
(b) in the Explanation, clause (a) shall be renumbered as clause (aa) thereof and before the clause as so renumbered, the following clause shall be inserted, namely:-
‘(a) “designated account” means an account of a person in a bank which has been opened solely for the purpose of deposit of money in foreign currency and utilisation of such money for payment to the specified company for subscription in the long-term infrastructure bonds issued by it;’.
Notes on Clauses:
Clause 43 of the Bill seeks to amend section 194LC of the Income-tax Act relating to income by way of interest from Indian company.
The existing provisions of sub-section (2) of the aforesaid section 194LC provide the nature of borrowings, interest on which would be eligible for concessional rate of tax (at the rate of five per cent.) to be deducted in accordance with sub-section (1) of the said section. The interest should be in respect of borrowings made by an Indian company in foreign currency from a source outside India either under a loan agreement or by way of issue of long-term infrastructure bonds, as approved by the Central Government.
It is proposed to amend the said sub-section (2) so as to provide that where a non-resident (not being a company) or a foreign company has deposited any sum of money in foreign currency in a designated account through which such sum, as converted in rupees, is utilised by the non-resident or the foreign company, as the case may be, to subscribe to any long term infrastructure bonds issued by the specified company in India, then, such borrowing for the purposes of section 194LC shall be deemed to have been made by the specified company in foreign currency. The designated account means an account of a person in a bank which has been opened solely for the purpose of deposit of money in foreign currency and utilisation of such money for payment to the specified company for subscription in the long term infrastructure bonds issued by it.
This amendment will take effect from 1st June, 2013.
