BUDGET 2020 - FII’s & Foreign Companies.

FII’s & Foreign Companies.

·         Section 194LC of the Act provides for a concessional deduction of tax at 5% by a specified company or a business trust, on interest paid to non-residents. The period of said concession deduction has been proposed to be extended to 01-07-2023 from 01-07-2020. Further, the rate of TDS been reduced to 4% on interest payment against borrowings through issues of long-term bonds and RDB which are listed only on a recognised stock exchange in any IFSC. 

·         Section 194LD of the Act provides for lower TDS of 5% in case of interest payments to Foreign Institutional Investors (FII) and Qualified Foreign Investors (QFIs) on their investment in Government securities and Rupee Denominated Bonds of an Indian company. It has been proposed to extend the period of concessional TDS of 5% to 01-07-2023 from existing 01-07-2020. Further, the concessional rate of TDS of 5% under the said section shall also apply on the interest payable to an FII or QFI in respect of the investment made in municipal debt security.

 

·         Exemption to Non Resident in filing of ROI in certain cases.  non-residents whose total income consists royalty or fees for technical services subject to requisite tax has been deducted at source, by amending section 115A of the Act with prospective effect from 1st April, 2020 to apply from the assessment year 2020-21 onwards.

·         Deferral of ‘significant economic presence’ (SEP) provisions-Applicability of the SEP provisions deferred to AY 2022-23.

 

·         Section 9A of the Act provides for a special regime in respect of offshore funds by providing them exemption from creating a “business connection” in India on fulfilment of certain conditions. It has been proposed that certain conditions for offshore funds shall be relaxed.

·         Section 94B provides for the restriction on deduction of interest payment made by the Indian company or a permanent establishment of the foreign company in India to its Associated Enterprise abroad. Finance bill proposed that provisions of interest limitation would not apply to interest paid in respect of a debt issued by a lender which is a PE of a non-resident, being a person engaged in the business of banking, in India. 

·         Safe harbour and APA going to be  extended to PE Attribution.