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What is Income by way of interest on certain bonds and Government securities? What is Other sums? Section 194LD and 195 of Income Tax Act 1961

Income by way of interest on certain bonds and Government securities and Other sums are defined under section 194 LD and 195 of Income Tax Act 1961. Provisions under these Sections are :

Section 194LD of Income Tax Act "Income by way of interest on certain bonds and Government securities"

Section 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.

(2) The income by way of interest referred to in sub-section (1) shall be the interest payable on or after the 1st day of June, 2013 but before the 90[1st day of July, 2017] in respect of investment made by the payee in-

 

(i) a rupee denominated bond of an Indian company ; or
(ii) a Government security:

Provided that the rate of interest in respect of bond referred to in clause (i) shall not exceed the rate as may be notified by the Central Government in this behalf.

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);

(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).]

Section 195 of Income Tax Act "Other sums"

Section 195. (1) 91Any 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) 92[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 :

Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O.

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 to the Assessing Officer to determine, by general or special order, 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 to the Assessing Officer to determine, by general or special order, 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.
Show Related Rules and Contents

89. See rules 30, 31, 31A, 31AB, 37BA and 37BB and Form Nos. 15CA, 15CB, 16A, 26B, 26AS, 27A and 27Q.

Income Tax Act 1961

What is Fees for professional or technical services? Section 194J of Income Tax Act 1961

What is Income in respect of units? Section 194 K of Income Tax Act 1961

What is Payment of compensation on acquisition of capital asset? What is Payment of compensation on acquisition of certain immovable property? Section 194 L and 194 LA of Income Tax Act 1961

What is Income by way of interest from infrastructure debt fund? What is the treatment of Certain income from units of a business trust? Section 194LB and 194 LBA of Income Tax Act 1961

What is Income in respect of units of investment fund? What is Income by way of interest from Indian company? Section 194LBB and 194 LC of Income Tax Act 1961

What is Income by way of interest on certain bonds and Government securities? What is Other sums? Section 194LD and 195 of Income Tax Act 1961

What is Income payable net of tax? What is Interest or dividend or other sums payable to Government, Reserve Bank or certain corporations? Section 195A and 196 of Income Tax Act 1961

What is Income in respect of units of non-residents? What is Income from units? Section 196A and 196B of Income Tax Act 1961

What is Income from foreign currency bonds or shares of Indian company Income of Foreign Institutional Investors from securities? Section 196C and 196D of Income Tax Act 1961

What is Certificate for deduction at lower rate? What is the meaning of No deduction to be made in certain cases? Section 197 and 197A of Income Tax Act 1961

Is Tax deducted is income received? Credit for tax deducted? Section 198 and 199 of Income Tax Act 1961

What is the Duty of person deducting tax? What is Processing of statements of tax deducted at source? Section 200 and 200A of Income Tax Act 1961

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