FOREIGN PORTFOLIO INVESTORS (FPIs), who are enjoying a concessional tax rate of 5% on the interest income of rupee-denominated bonds, could be staring at a higher tax outgo after June 30, 2023.
FPIs enjoy a lower TDS rate or withholding tax of 5% on the overall interest earned on such bonds issued by Indian firms and government securities since 2013 under Section 194LD of the Income Tax Act.
The government had introduced the lower tax rates in 2013 after a wobble in the rupee led to a flight of foreign money. These were applicable on interest payable till May 31, 2015. Record FPI inflows in the debt segment in 2014 prompted the Centre to extend the concession thrice in subsequent years.
It was widely expected that this sunset period would get extended by another three years or at least a year. However, no announcement to this effect was made in this year's Budget, which would mean that the tax rate is now likely to go up to 20% plus applicable surcharge and education cess. This could accelerate selling in such bonds before June from FPIs who do not want to pay higher tax.
Esta historia es de la edición February 03, 2023 de Financial Express Mumbai.
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