TDS on Income by way of interest from Infrastructure Debt Fund [Section 194LB] | AY 2019-20 onwards

Special rate of tax on interest received by non-residents from notified infrastructure debt funds

Interest income received by a non-corporate non-resident or a foreign company from notified infrastructure debt funds set up in accordance with the prescribed guidelines would be subject to tax at a concessional rate of 5% under section 115A on the gross amount of such interest income as compared to tax @20% on other interest income of non-resident. The concessional rate of tax is expected to give a fillip to infrastructure and encourage inflow of long-term foreign funds to the infrastructure sector.

Rate of TDS

Accordingly, tax would be deductible @ 5% on interest paid/credited by such fund to a non-resident/foreign company.

Time of deduction

The person responsible for making the payment 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 issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax @5%.