Thursday, February 14, 2013

I- T dept to simplify norms on ECB interest payment

New Delhi, 13 February
The Income Tax ( I- T) Department is looking at ways to relax and simplify the rules on tax collection and credit associated with foreign investments into the country, especially via external commercial borrowing ( ECB).
Concern has been raised on the method of identification for providing tax credit and the requirement of a permanent account number (PAN) for deduction of withholding tax.
Industry had raised these two issues before a Central Board of Direct Taxes committee looking into the matter, said a senior finance ministry official.
The panel is to soon give its report to the ministry and is expected to suggest simpler norms, said the official.
One member of an apex business chamber, who’d taken part in the discussions, said the PAN requirement for a lower withholding tax on ECB interest payments was seen as a major trouble area.
From April 1, 2010, under Section 206A of the I- T Act, any person entitled to receive a sum or income or amount on which tax is deductible in these cases is required to furnish his PAN to the person responsible for deducting such tax. If the PAN isn’t there, tax has to be deducted at 20 per cent.
The Finance Act, 2012, introduced Section 194LC in the I- T Act, providing for a lower withholding tax at five per cent on interest payments by Indian companies on borrowings made in foreign currency by such companies from a source outside India.
The chamber representative said with foreign investors reluctant to get into the process of getting a PAN, this differential treatment was proving an irritant.
The ministry official said the department will have to find a way out in which individual investors were not troubled but the required information was also with the department.
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