This section deals with the deduction of TDS on interest paid by Indian companies or a Business Trust to a non-corporate non-resident or a foreign company @5%.
Section 194LC of the Act, provided for a concessional rate of Tax Deductible at Source (TDS) at five percent by a specified company or a business trust, on interest paid to non-residents on the following forms of borrowings (approved by the Central Government) made in foreign currency from sources outside India:
- Monies borrowed under a loan agreement at any time on or after 1st July 2012 and before 1st July 2020;
- Borrowings by way of issue of any long-term infrastructure bond at any time on or after 1st July 2012 and before 1st July 2014;
- Borrowings by way of issue of a long-term bond including long-term infrastructure bonds at any time on or after 1st of October 2014 and before 1st July, 2020;
- in respect of monies borrowed from a source outside India by way of issue of rupee-denominated bond before July 1, 2020.
Tax shall be deducted at the time of payment or at the time of giving credit to the other party, whichever is earlier.
In order to attract fresh investment, create jobs and stimulate the economy, it is proposed to; –
- extend the period of said concessional rate of TDS of five percent to 1st July 2023 from 1st July 2020;
- provide that the rate of TDS shall be four percent 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 RDB on or after 1st April 2020 but before 1st July 2023 and which is listed only on a recognized stock exchange located in any IFSC.