| WHAT was promised and made a part of the Finance
Act, 2012, has finally been notified by the CBDT today. The withholding tax
rate on interest payment to non-resident, which was proposed to be reduced
from 20% to 5%, has been finally notified for the period of the July 1,
2012 to June 30, 2015.
The
rationale behind reduction in the TDS rate is to reduce the cost of borrowings
for the Indian infrastructure and other corporates. Since the prevailing
interest rate regime in India has been little harsh for quite some time,
the former Finance Minister had thought it wise to provide some relief
to the Indian Inc by mitigating the cost of loans through the ECB route.
Going
by the Circular it is clear that the Govt has also given up its discretion
to grant case-to-case approval. In other words, as long as one meets the
conditions prescribed under various allied acts like FEMA, RBI Exchange
Control Act etc, one need not knock at the window of North Block or the
RBI for raising critical viability gap funds for extensive expansion projects.
(See Circular No 7 of 2012)
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