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TDS from Income by way of Interest on certain Bonds / Government Securites (Section 194LD)

 

Who is responsible to Deduct TDS under Section 194LD

Any person who is responsible for paying to a person being a Foreign Institutional Investor or a Qualified Foreign Investor any income by way of interest payable on or after 1.6.2013 but before 1.7.2020 in respect of investment made by the payee in—

  1. a rupee denominated bond of an Indian company;

  2. a Government Security.

shall deduct the tax at source.

However, the rate of interest in respect of bond referred to in clause (i) shall not exceed the rate as may be notified by the Central Government in this behalf.

When TDS under Section 194LD is to be Deducted ?

Tax is to be deducted:

  1. at the time of credit of such sum to the account of the payee, or

  2. at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode,

whichever is earlier,

Rate of TDS under Section 194LD

The rates of TDS shall be 5%.

Notes:

  1. Surcharge, wherever applicable plus education cess and SHEC shall be added to the above rates.

  2. The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

  3. The provisions of section 206AA shall not apply to a non-resident, not being a company, or to a foreign company, in respect of income by way of interest under this section subject to such conditions as may be prescribed.

Meaning of "foreign institutional investor"

"Foreign Institutional Investor" shall have the meaning assigned to it in clause (a) of the Explanation to section 115AD;

The expression "Foreign Institutional Investor" means such investor as the Central Government may, by notification in the Official Gazette, specify in this behalf.

Meaning of "Government security"

"Government security" shall have the meaning assigned to it in clause (b) of section 2 of the Securities Contracts (Regulation) Act, 1956;

As per section 2(b) of the Securities Contracts (Regulation) Act, 1956:

"Government security" means a security created and issued, whether before or after the commencement of this Act, by the Central Government or a State Government for the purpose of raising a public loan and having one of the forms specified in clause (2) of section 2 of the Public Debt Act, 1944.

Meaning of "Qualified Foreign Investor"

"Qualified Foreign Investor" shall have the meaning assigned to it in the Circular, No. CIR/IMD/DF/14/2011, dated 9.8.2011, as amended from time to time, issued by the Securities and Exchange Board of India, under section 11 of the Securities and Exchange Board of India Act, 1992.

CONTENT-Tax Deducted at Source (TDS) [Section 190 to 206CA]

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