UNDER section
194LC of the Income-tax Act, the payment of interest by an Indian company
to a non-resident on money borrowed in foreign currency under a loan agreement
or through issue of a long term infrastructure bond is subject to deduction
of tax at the rate of 5 per cent instead of general rate of deduction of
20 per cent. Under section 206AA of the Act, if such non-resident does not
provide his Permanent Account Number (PAN) to the payer, then the tax is required
to be withheld at the rate of 20 per cent.
Considering the practical difficulties in obtaining PAN by the non-resident
bondholders, it is proposed to amend section 206AA so as to provide that provisions
of section 206AA of the Act shall not apply to interest paid to a non- resident
on long-term infrastructure bonds referred to in section 194LC of the Act.
The proposed amendment shall take effect from 1st day of June, 2013.
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