Amendment of section 194LC.
67. In section 194LC of the Income-tax Act, in sub-section (2),-
(a) in clause (i), with effect from the 1st day of April, 2018,-
(A) in sub-clauses (a) and (c), for the figures, letters and words “1st day of July, 2017”, the figures, letters and words “1st day of July, 2020” shall be substituted;
(B) in the long line, for the word “and”, the word “or” shall be substituted;
(b) after clause (i), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2016, namely:-
“(ia) in respect of monies borrowed by it from a source outside India by way of issue of rupee denominated bond before the 1st day of July, 2020, and”.
Notes on Clauses:
Clause 67 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 contained in sub-section (2) of the said section, specify the interest eligible for lower withholding tax at the 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 under a loan agreement or by way of issue of any long-term bonds including long-term infrastructure bonds subject to the approval by the Central Government.
Sub-clauses (a) and (c) of clause (i) of the said sub-section further provides that the borrowing shall be made, under a loan agreement at any time on or after the 1st day of July, 2012, but before the 1st day of July, 2017; and by way of any long-term bond including long-term infrastructure bond on or after the 1st day of October, 2014, but before the 1st day of July, 2017, respectively.
It is proposed to amend sub-clauses (a) and (c) of clause (i) of sub-section (2) of the said section to provide that the borrowings can be made before the 1st day of July, 2020 instead of the 1st day of July, 2017.
These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-2019 and subsequent years.
It is also proposed to insert a new clause (ia) in sub-section (2) of the said section to extend the benefit of the said section to the rupee denominated bond issued outside India before 1st July, 2020 also.
This amendment will take effect retrospectively from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-2017 and subsequent years.
