Income by way of interest from an Indian company [Section 194LC] under Deduction of tax at source from non-resident’s income :

(1) Interest paid by an Indian company or a business trust to a foreign company or a non-corporate non-resident in respect of borrowing made in foreign currency from sources outside India would be subject to tax at a concessional rate of 5% on gross interest (as against the rate of 20% of gross interest applicable in respect of other interest received by a non -corporate non-resident or foreign company from Government or an Indian concern on money borrowed or debt incurred by it in foreign currency).

(2) To avail this concessional rate, the borrowing should be in foreign currency from a source outside India under a loan agreement at any time between 1.7.2012 and 30.6.2017 or by way of issue of long-term infrastructure bonds approved by the Central Government at any time between 1.7.2012 and 30.9.2014 or by way of issue of any long-term bond including infrastructure bond at any time between 1.10.2014 and 30.6.2017.

(3) The interest to the extent the same does not exceed the interest calculated at the rate approved by the Central Government, taking into consideration the terms of the loan or the bond and its repayment, will be subject to tax at a concessional rate of 5%.

(4) Such interest paid by an Indian company to a non-corporate non-resident or a foreign company would be subject to TDS@5% under section 194LC.

(5) Further, levy of higher rate of TDS@20% under section 206AA in the absence of PAN would not be attracted in respect of payment of interest on long-term infrastructure bonds, as referred to in section 194LC, to a non-corporate non-resident or to a foreign company.