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Home Acts & Rules Bill Bills FINANCE (No. 2) BILL, 2014 Chapters List Chapter III DIRECT TAXES This

Clause 57 - Amendment of section 194LC - FINANCE (No. 2) BILL, 2014

FINANCE (No. 2) BILL, 2014
Chapter III
DIRECT TAXES
  • Contents

Amendment of section 194LC

57. In section 194LC of the Income-tax Act, with effect from the 1st day of October, 2014,––

          (A) in sub-section (1), after the words “by a specified company”, the words “or a business trust” shall be inserted;

          (B) in sub-section (2),––

          (a) in the opening portion, after the words “by the specified company”, the words “or the business trust” shall be inserted;

          (b) for clause (i), the following clause shall be substituted, namely:––

          “(i) in respect of monies borrowed by it in foreign currency from a source outside India,—

          (a) under a loan agreement at any time on or after the 1st day of July, 2012 but before the 1st day of July, 2017; or

          (b) by way of issue of long-term infrastructure bonds at any time on or after the 1st day of July, 2012 but before the 1st day of October, 2014; or

          (c) by way of issue of any long-term bond including long-term infrastructure bond at any time on or after the 1st day of October, 2014 but before the 1st day of July, 2017, as approved by the Central Government in this behalf; and”.

 



 

Notes on Clauses:

Clause 57 of the Bill seeks to amend section 194LC of the Income-tax Act relating to income by way of interest from Indian company.

          Under the existing provisions of the aforesaid section, the beneficial provision of lower rate of withholding tax is available on payment made by an Indian company subject to the conditions provided therein.

          It is proposed to amend the said section to provide for the benefit of reduced withholding tax on interest income in case of external commercial borrowings by business trust, subject to the same conditions provided in the section.

          The existing provisions contained in sub-section (2) of section 194LC specify the interest eligible for lower withholding tax rate of five per cent. It shall be the interest income payable by the specified company on borrowings made by it in foreign currency from sources outside India by way of long-term infrastructure bonds or under a loan agreement subject to approval by the Central Government. The sub-section further provides that the borrowing should be made at any time on or after the 1st day of July, 2012 but before the 1st day of July, 2015.

          It is proposed to amend sub-section (2) of the aforesaid section to provide that the borrowings can be made before 1st July, 2017 instead of currently provided cut-off date of 1st July,

          2015. It is further proposed to provide that the benefit of the section would be available to all long-term bonds including long- term infrastructure bonds.

          These amendments will take effect from 1st October, 2014.

 
 
 
 

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