Non Residents to be charged 5% tax only on interest on infrastructure bonds

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(MAJOR HIGHLIGHTS OF UNION BUDGET 2011-12)   For Slab rates F/Y 2011-12 Click Here

Good tax relief for non residents ! The Finance Bill 2011-12 has put in place intention of government to facilitate Indian companies or entities  to issue infrastructure bonds to non residents – whether individual or company  and bring foreign money for infrastructure purpose . For this purpose , the tax relief has been proposed in form of lower tax rate of 5 % in the I T Act. Following new amendments and insertion of new sub clauses are proposed to section 115A

115A. (1) Where the total income of—

(a) a non-resident (not being a company) or of a foreign company, includes any income by way of—

(i) ; or

(ii) interest received from Government or an Indian concern on monies borrowed or debt incurred by Government or the Indian concern in foreign currency ; or

Should be read as

interest received from Government or an Indian concern on monies borrowed or debt incurred by Government or the Indian concern in not being interest of the nature referred to in clause (iia) ; or

(iia) interest received  from an infrastructure debt fund referred to in clause (47) of section10 or

Second new insertion is Clause BA ,  which reads as

(BA) the amount of income-tax calculated on the amount of income by way of interest referred to in sub-clause (iia), if any, included in the total income, at the rate of five per cent.;";

In nut shell any non resident whether Individual or a company which subscribe to infrastructure bond notified in this regard , will have to pay tax @ 5 % only on the interest earned on such bonds.

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