Existing provisions of section 206AA.
Where the payee does not furnish the PAN, section 206AA obliges the deduction of tax at source at the higher of the -(i) at the rate specified in the relevant provision of this Act; or(ii) at the rate or rates in force; or(iii) at the rate of twenty per cent.This provision was not to applicable in respect of payment of interest, on long-term infrastructure bonds, as referred to in section 194LC, to a non-resident, not being a company, or to a foreign company.
Amendment proposed by Finance Bill (No. 2) 2014
In order to enable the companies to step up their investments in India and augment their low cost long term foreign borrowings for Indian companies, the Finance Minister in budget speech proposed to extend the eligible date of borrowing in foreign currency from 30.06.2016 to 30.06.2017 for a concessional tax rate of 5 percent on interest payments and also to extend this tax incentive to all types of bonds instead of only infrastructure bonds.
With effect from the 1st day of October, 2014, section 194LC of the Income-tax Act, is extended to borrowings by "a business trust" under a loan agreement by way of issue of any long-term bond including long-term infrastructure bond in foreign currency from a source outside India also to be taxable by withholding tax at 5% on interest paid respect of monies borrowed by it. In order to grant concessional rate of tax to all such borrowings, the restrictive word "infrastructure" is omitted from Section 206AA(7)with effect from the 1st day of October, 2014.
Where the payee does not furnish the PAN, section 206AA obliges the deduction of tax at source at the higher of the -(i) at the rate specified in the relevant provision of this Act; or(ii) at the rate or rates in force; or(iii) at the rate of twenty per cent.This provision was not to applicable in respect of payment of interest, on long-term infrastructure bonds, as referred to in section 194LC, to a non-resident, not being a company, or to a foreign company.
Amendment proposed by Finance Bill (No. 2) 2014
In order to enable the companies to step up their investments in India and augment their low cost long term foreign borrowings for Indian companies, the Finance Minister in budget speech proposed to extend the eligible date of borrowing in foreign currency from 30.06.2016 to 30.06.2017 for a concessional tax rate of 5 percent on interest payments and also to extend this tax incentive to all types of bonds instead of only infrastructure bonds.
With effect from the 1st day of October, 2014, section 194LC of the Income-tax Act, is extended to borrowings by "a business trust" under a loan agreement by way of issue of any long-term bond including long-term infrastructure bond in foreign currency from a source outside India also to be taxable by withholding tax at 5% on interest paid respect of monies borrowed by it. In order to grant concessional rate of tax to all such borrowings, the restrictive word "infrastructure" is omitted from Section 206AA(7)with effect from the 1st day of October, 2014.
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