Amendment of section 94B.
47. In section 94B of the Income-tax Act, with effect from the 1st day of April 2024,––
(i) in sub-section (3), after the words “banking or insurance”, the words “or such class of non-banking financial companies as may be notified by the Central Government in the Official Gazette in this behalf” shall be inserted;
(ii) in sub-section (5), after clause (ii), the following clause shall be inserted, namely:––
‘(iia) “non-banking financial company” shall have the meaning assigned to it in clause (vii) of the Explanation to clause (viia) of sub-section (1) of section 36;’.
Notes on Clauses:
Clause 47 of the Bill seeks to amend section 94B of the Income-tax Act relating to limitation on interest deduction in certain cases.
The said section, inter alia, provides that notwithstanding anything contained in the 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 deductible in computation of income under the said head shall be restricted only to the extent of thirty per cent., of its earnings before interest, taxes, depreciation and amortisation or interest paid or payable to associated enterprise, whichever is less.
It is proposed to amend sub-section (3) of the said section so as to provide that the provision of said section shall not apply to such class of non-banking financial companies as may be notified by the Central Government in the Official Gazette in this behalf.
It is further proposed to define the expression “non-banking financial company”.
These amendments will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
