Extension of eligible period of concessional tax rate under section 194LD

[Admin TMI]

Question- What are the proposed amendment in section 194LD regarding concessional rate of withholding tax on interest payment to FII , QFIs and ECB ?

[Admin TMI]

Extension of eligible period of concessional tax rate under section 194LD

The existing provisions of section 194LD of the Act, provide for lower withholding tax at the rate of 5 percent in case of interest payable at any time on or after the 1st day of June, 2013 but before the 1st day of June, 2015 to FIIs and QFIs on their investments in Government securities and rupee denominated corporate bonds provided that the rate of interest does not exceed the rate notified by the Central Government in this regard.

The limitation date of the eligibility period for benefit of reduced rate of tax available under section 194LC in respect of external commercial borrowings (ECB) has been extended from 30th June, 2015 to 30th June, 2017 by Finance (No.2) Act, 2014.

Accordingly, it is proposed to amend section 194LD to provide that the concessional rate of 5% withholding tax on interest payment under the section will now be available on interest payable upto 30th June, 2017.

This amendment will take effect from 1st June, 2015.

AI Summary

Concessional withholding tax rate on interest to foreign investors extended, preserving reduced treatment for specified securities and bonds.
The amendment extends the concessional withholding tax treatment for interest payable to Foreign Institutional Investors and Qualified Foreign Investors on government securities and rupee denominated corporate bonds, subject to the notified cap on the rate of interest, so that the concessional rate applies to interest payable up to 30th June, 2017; the amendment is effective from 1st June, 2015.