Amendment of section 194LD.
83. In section 194LD of the Income-tax Act,––
(i) for sub-section (2), the following sub-section shall be substituted, namely:––
“(2) The income by way of interest referred to in sub-section (1) shall be the interest payable,––
(a) on or after the 1st day of June, 2013 but before the 1st day of July, 2023 in respect of the investment made by the payee in ––
(i) a rupee denominated bond of an Indian company; or
(ii) a Government security;
(b) on or after the 1st day of April, 2020 but before the 1st day of July, 2023 in respect of the investment made by the payee in municipal debt securities:
Provided that the rate of interest in respect of bond referred to in sub-clause (i) of clause (a) shall not exceed the rate as the Central Government may, by notification in the Official Gazette, specify.";
(ii) in the Explanation, after clause (b), the following clause shall be inserted, namely:––
‘(ba) “municipal debt securities” shall have the meaning assigned to it in clause (m) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Issue and Listing of Municipal Debt Securities) Regulations, 2015 made under the Securities and Exchange Board of India Act, 1992; (15 of 1992)’.
Notes on Clauses:
Clause 83 of the Bill seeks to amend section 194LD of the Income-tax Act relating to income by way of interest on certain bonds and Government securities.
Sub-section (2) of the said section specifies that the interest payable on or after the 1st day of July, 2013 but before the 1st day of July, 2020, in respect of investments made in a rupee denominated bond of an Indian company or a Government security shall be eligible for lower withholding tax of five per cent.
It is proposed to substitute the said sub-section so as to provide that the concessional rate of five per cent. with holding tax shall be available on the interest payable––
(i) on or after the 1st day of July, 2013 but before the 1st day of July, 2023, in respect of investments made in rupee denominated bond of an Indian company or a Government security;
(ii) on or after the 1st day of April, 2020 but before the 1st day of July, 2023 in respect of investments made in a municipal debt securities.
It is further proposed to provide that the rate of interest in respect of rupee denominated bond of an Indian company shall not exceed the rate as may be notified by the Central Government in this behalf.
It is also proposed to insert new clause (ba) in the Explanation to the said section so as to define the expression “municipal debt securities”.
These amendments will take effect from 1st April, 2020.
