SME Times News Bureau | 21 Sep, 2012
In yet another move to draw in international capital, the Indian
government Friday reduced tax on overseas borrowings by domestic
companies to five percent from 20 percent, making it easier for local
companies to raise funds abroad.
Finance Minister P. Chidambaram
said the reduced tax rate will be applicable to the funds borrowed
between July 2012 and June 2015.
Liability of the Indian company to withhold tax on such income would also be at the reduced rate of 5 percent.
"This
lower rate of taxation will apply to interest paid to a non-resident by
an Indian company for money borrowed in foreign currency from a source
outside India, either under a loan agreement or by way of long-term
infrastructure bonds," the finance minister said.
To lower the
compliance burden and reduce the time lag which would arise on account
of case-by-case approval, the government has decided to grant approval
to all borrowings by way of loan agreement and long-term infrastructure
bonds that satisfy certain conditions.
No specific approval in such cases would be required.
Borrowings
under a loan agreement or by way of issue of long-term infrastructure
bonds that comply with External Commercial Borrowings (ECB) regulations
as administered by the Reserve Bank of India (RBI) would be eligible for
availing of the benefit of this concessional tax regime.
In
case of long-term infrastructure bonds, the end use of the proceeds of
such bond issue should be for the infrastructure sector as defined by
RBI under its ECB regulations, the finance ministry said.
