Section 194LB & 194LC of Income Tax Act

Section 194LB & 194LC

Today we will discuss about Section 194LB & 194LC of Income Tax Act and about TDS role in this act and many more.

Section 194LB & 194LC of Income Tax Act

Section 194LB & 194LC

Section 194LB of Income Tax Act

This section 194LB of income tax act, 1961, covers provisions; relating to the deduction of TDS on payment of interest on infrastructure debt fund.

Where any income by way of interest is payable to a foreign company or to a non-resident (not being a company); by an infrastructure debt fund referred to in clause (47) of section 10; the person liable for making the payment; at the time of credit of such income to the account of the payee; or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode; whichever is earlier, shall deduct income-tax thereon at the rate of 5%.

Section 194LC of Income Tax Act

Section 194LC covers provisions relating to deduction of TDS on payment of interest by an Indian Company or a business trust; in respect of money borrowed in foreign currency under a loan agreement; or by way of issue of long-term bonds including long-term infrastructure bond.

Under this section, where any income by way of interest referred to in sub-section (2) is payable to a foreign company or to a non-resident; not being a company by a specified company, the person liable for making the payment; at the time of credit of such income to the account of the payee; or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode; whichever is earlier, shall deduct the income tax thereon at the rate of 5%.

Note: With effect from 1st April 2018 benefit of such concessional TDS rate has been further extended by three years. Now TDS at concessional rate of 5% will be applicable for borrowing made before 1st July 2020.Section 194LB & 194LC

The interest referred to in sub-section (1) shall be the income by way of interest payable by the specified company or business trust;

  • In respect of money borrowed by it at any time on or after the 1st July, 2012 but before the 1st July, 2017 in foreign currency; from a source outside India, under a loan agreement; or by way of issue of long-term infrastructure bonds at any time on or after 1st July, 2012 but before 1st October, 2014 as approved by the Central Government in this behalf, or by way of issue of any long-term infrastructure bond at any time on or after the 1st October, 2014 but before 1st July, 2017 as approved by the Central Government in this behalf.
  • In respect of monies borrowed by it from a source outside India; by way of rupee-denominated bond before the 1st July 2020
  • To the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in his behalf, having regard to the terms of the loan or the bond and its payment.

For the purposes of this section; ‘foreign currency’ shall have the meaning assigned to it in section 2(m) of the Foreign Exchange Management Act, 1999; whereas, ‘specified company’ means an Indian company.

Section 194LB & 194LC

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