Budget 2015- 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.

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NOTE ON RELEVANT CLAUSES  OF FINANCE BILL 2015

Clause 47 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.

Under the existing provisions contained in sub-section (2) of the aforesaid section, the interest income eligible for lower withholding tax rate of five per cent. as provided in sub-section (1) has been specified to be the interest payable on or after the 1st day of June, 2013 but before the 1st day of June, 2015.

It is proposed to amend aforesaid sub-section (2) to provide that the concessional rate of five per cent withholding tax on interest payment in respect of investments in Government securities and rupee denominated corporate bonds shall now be available on interest payable before the 1st day of July, 2017.

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

EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015

47. Amendment of section 194LD.

In section 194LD of the Income-tax Act, in sub-section (2), with effect from the1st day of June, 2015, for the figures, letters and words “1st day of June, 2015”, the figures, letters and words “1st day 30 of July, 2017” shall be substituted.

( Compiled Jointly by CA Ankit Banka & Taxguru Team)

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One response to “Extension of eligible period of concessional tax rate U/s. 194LD”

  1. Sonal Gupta says:

    Has In Finance Act, 2015 limitation date of eligibility under section 194LC extended or not??

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