Amendment of section 194LC.
82. In section 194LC of the Income-tax Act,––
(i) in sub-section (1), the following proviso shall be inserted, namely:––
“Provided that in case of income by way of interest referred to clause (ib) of sub-section (2), the income-tax shall be deducted at the rate of four per cent.”;
(ii) in sub-section (2),––
(a) in clause (i), in sub-clause (a) and sub-clause (c), for the figures “2020”, the figures “2023” shall be substituted;
(b) in clause (ia), for the figures and word “2020, and”, the figures and word “2023, or” shall be substituted;
(c) after clause (ia), the following clause shall be inserted, namely:––
“(ib) in respect of monies borrowed by it from a source outside India by way of issue of any long-term bond or rupee denominated bond on or after the 1st day of April, 2020 but before the 1st day of July, 2023, which is listed only on a recognised stock exchange located in any International Financial Services Centre, and”;
(iii) in the Explanation, after clause (b), the following clauses shall be inserted, namely:––
‘(c) “International Financial Services Centre" shall have the meaning assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005; (28 of 2005)
(d) “recognised stock exchange” shall have the meaning assigned to it in clause (ii) of Explanation 1 to clause (5) of section 43.’.
Notes on Clauses:
Clause 82 seeks to amend section 194LC of the Income-tax Act relating to income by way of interest from Indian company.
Sub-section (1) of the said section provides that income-tax at the rate of five per cent. shall be deducted on any interest referred to in sub-section (2), payable by a specified company or business trust to a non-resident, in respect of monies borrowed in foreign currency from a source outside India.
It is proposed to insert a proviso in sub-section (1) of the said section so as to provide that the withholding tax of four per cent. shall be deducted on interest referred to in clause (ib) of sub-section (2) of said section.
Sub-section (2) of said section specifies the interest which is eligible for withholding tax of five per cent. on borrowings made under a loan agreement at any time on or after the 1st day of July, 2012 but before the 1st day of July, 2020, through issue of long-term infrastructure bond at any time on or after the 1st day of July, 2012 but before the 1st day of October, 2014, through any long-term bond including long-term infrastructure bond at any time on or after 1st day of October, 2014 but before the 1st day of July, 2020 or by way of issue of rupee denominated bonds before the 1st day of July, 2020 subject to the approval of the Central Government.
It is proposed to amend said sub-section (2) so as to extend the period of rate of withholding tax of five per cent. on the interest payments against borrowing made under a loan agreement, issue of long-term bonds including infrastructure bonds and issue of rupee denominated bonds from the 1st day of July, 2020 to the 1st day of July, 2023.
It is also proposed to insert a new clause (ib) in subsection (2) of the said section so as to extend the withholding tax of four per cent. on the interest payable to a non-resident, in respect of monies borrowed in foreign currency from a source outside India, by way of issue of any long term bond or rupee denominated bond on or after the 1st day of April,2020 but before the 1st day of July, 2023, which is listed only on a recognised stock exchange located in any International Financial Services Centre.
These amendments will take effect from the 1st April, 2020.
