Section 194LD of Income Tax Act "Income by way of interest on certain bonds and Government securities"
194LD. (1) 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 referred to
in sub-section (2), shall, at the time of credit of such
income to the account of the payee or at the time of payment
of such income in cash or by the issue of a cheque or draft
or by any other mode, whichever is earlier, deduct
income-tax thereon at the rate of five per cent.
65[(2) The income by way of interest referred to in
sub-section (1) shall be the interest payable,-
(a) on or after the 1st day of June, 2013 but before the
1st day of July, 2023 in respect of the investment made by
the payee in-
(i) a rupee denominated bond of an Indian company; or
(ii) a Government security;
(b) on or after the 1st day of April, 2020 but before the
1st day of July, 2023 in respect of the investment made by
the payee in municipal debt securities:
Provided that the rate of interest in respect of bond
referred to in sub-clause (i) of clause (a) shall not exceed
the rate as the Central Government may, by notification in
the Official Gazette, specify.]
Explanation.-For the purpose of this section,-
(a) "Foreign Institutional Investor" shall have the meaning
assigned to it in clause (a) of the Explanation to section
115AD;
(b) "Government security" shall have the meaning assigned to
it in clause (b) of section 2 of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956);
66[(ba) "municipal debt securities" shall have the meaning
assigned to it in clause (m) of sub-regulation (1) of
regulation 2 of the Securities and Exchange Board of India
(Issue and Listing of Municipal Debt Securities)
Regulations, 2015 made under the Securities and Exchange
Board of India Act, 1992 (15 of 1992);]
(c) "Qualified Foreign Investor" shall have the meaning
assigned to it in the Circular No. Cir/IMD/DF/14/2011, dated
the 9th August, 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
(15 of 1992).
195.(1) Any person responsible for paying to a non-resident,
not being a company, or to a foreign company, any interest
(not being interest referred to in section 194LB or section
194LC) or section 194LD or any other sum chargeable under
the provisions of this Act (not being income chargeable
under the head "Salaries") shall, at the time of credit of
such income to the account of the payee or at the time of
payment thereof in cash or by the issue of a cheque or draft
or by any other mode, whichever is earlier, deduct
income-tax thereon at the rates in force :
Provided that in the case of interest payable by the
Government or a public sector bank within the meaning of
clause (23D) of section 10 or a public financial institution
within the meaning of that clause, deduction of tax shall be
made only at the time of payment thereof in cash or by the
issue of a cheque or draft or by any other mode.
70[***]
Explanation 1.-For the purposes of this section, where any
interest or other sum as aforesaid is credited to any
account, whether called "Interest payable account" or
"Suspense account" or by any other name, in the books of
account of the person liable to pay such income, such
crediting shall be deemed to be credit of such income to the
account of the payee and the provisions of this section
shall apply accordingly.
Explanation 2.-For the removal of doubts, it is hereby
clarified that the obligation to comply with sub-section (1)
and to make deduction thereunder applies and shall be deemed
to have always applied and extends and shall be deemed to
have always extended to all persons, resident or
non-resident, whether or not the non-resident person has-
(i) a residence or place of business or business connection
in India; or
(ii) any other presence in any manner whatsoever in India.
(2) Where the person responsible for paying any such sum
chargeable under this Act (other than salary) to a
non-resident considers that the whole of such sum would not
be income chargeable in the case of the recipient, he may
make an application 71[in such form and manner to the
Assessing Officer, to determine in such manner, as may be
prescribed], the appropriate proportion of such sum so
chargeable, and upon such determination, tax shall be
deducted under sub-section (1) only on that proportion of
the sum which is so chargeable.
(3) Subject to rules made under sub-section (5), any person
entitled to receive any interest or other sum on which
income-tax has to be deducted under sub-section (1) may make
an application in the prescribed form to the Assessing
Officer for the grant of a certificate authorising him to
receive such interest or other sum without deduction of tax
under that sub-section, and where any such certificate is
granted, every person responsible for paying such interest
or other sum to the person to whom such certificate is
granted shall, so long as the certificate is in force, make
payment of such interest or other sum without deducting tax
thereon under sub-section (1).
(4) A certificate granted under sub-section (3) shall remain
in force till the expiry of the period specified therein or,
if it is cancelled by the Assessing Officer before the
expiry of such period, till such cancellation.
(5) The Board may, having regard to the convenience of
assessees and the interests of revenue, by notification in
the Official Gazette, make rules specifying the cases in
which, and the circumstances under which, an application may
be made for the grant of a certificate under sub-section (3)
and the conditions subject to which such certificate may be
granted and providing for all other matters connected
therewith.
(6) The person responsible for paying to a non-resident, not
being a company, or to a foreign company, any sum, whether
or not chargeable under the provisions of this Act, shall
furnish the information relating to payment of such sum, in
such form and manner, as may be prescribed.
(7) Notwithstanding anything contained in sub-section (1)
and sub-section (2), the Board may, by notification in the
Official Gazette, specify a class of persons or cases, where
the person responsible for paying to a non-resident, not
being a company, or to a foreign company, any sum, whether
or not chargeable under the provisions of this Act, shall
make an application 72[in such form and manner to the
Assessing Officer, to determine in such manner, as may be
prescribed], the appropriate proportion of sum chargeable,
and upon such determination, tax shall be deducted under
sub-section (1) on that proportion of the sum which is so
chargeable.