Amendment of section 94B.
46. In section 94B of the Income-tax Act, after sub-section (1), the following sub-section shall be inserted with effect from the 1st day of April, 2021, namely:––
“(1A) Nothing contained in sub-section (1) shall apply to interest paid in respect of a debt issued by a lender which is a permanent establishment in India of a non-resident, being a person engaged in the business of banking.”.
Notes on Clauses:
Clause 46 of the Bill seeks to amend section 94B of the Income-tax Act relating to limitation on interest deduction in certain cases.
Sub-section (1) of said section, inter alia, provides that notwithstanding anything contained in this Act, where an Indian company, or a permanent establishment of a foreign company in India, being the borrower, incurs any expenditure by way of interest or of similar nature exceeding one crore rupees which is deductible in computing income chargeable under the head "Profits and gains of business or profession" in respect of any debt issued by a non-resident, being an associated enterprise of such borrower, the interest shall not be deductible in computation of income under the said head to the extent that it arises from excess interest, as specified in sub-section (2).
It is proposed to insert a new sub-section (1A) after the said sub-section so as to provide that nothing contained in that sub-section shall apply to interest paid in respect of a debt issued by a lender which is a permanent establishment of a non-resident, being a person engaged in the business of banking, in India.
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.
