What is the withholding obligation of IndiGrid Infrastructure Trust on interest payments?
Resident Individual Investors: In accordance with section 194A of the Income Tax Act (the Act), the withholding is required to be done at the rate of 10% on interest paid to residents. However, if an eligible resident investor provides a valid declaration in Form 15G/ 15H, tax will not be deducted.
Resident Non-Individual Investors: no TDS shall be deducted on submission of the following documents:
| CATEGORY | DOCUMENTS REQUIRED |
|---|---|
| Insurance Companies | · Declaration that they are beneficial owners of NCDs held. · Self-attested copy of relevant registration documents. · Self-attested copy of PAN. |
| Mutual Funds | · Declaration that they are governed by provisions of section 10(23D) of the Income Tax Act. · Self-attested copy of relevant registration documents. |
| Alternative Investment Funds (AIF) established in India | · Declaration that their income is exempt under section 10(23FBA) of the Income Tax Act. · Declaration that they are established as Category – I or Category – II AIF under the SEBI regulations. · Self-attested copy of relevant registration documents. · Self-attested copy of PAN. |
Entities whose income is unconditionally exempt under section 10 of the Income Tax Act and that are statutorily not required to file return of income, being exempted from TDS by the CBDT Circular No. 18 of 2017, are required to provide self-attested valid documentary evidence (like approval granted by Income Tax Officer / Commissioner, relevant copy of registration, etc.)
| CATEGORY | DOCUMENTS REQUIRED |
|---|---|
| Government | · Documentary evidence and self-declaration that it is a Corporation set up under specific legislation whose income is exempt from any income-tax and can be considered as ‘Government’ and qualify for exemption under section 196 of the Act. |
| National Pension Scheme Trust | · Registration certificate/ self-declaration that the it qualifies as NPS Trust for the purpose of section 197A(1E) of the Act, and that its income is eligible for exemption under section 10(44) of the Act. |
Note: It may be noted that as per the provisions of section 206AA of the Act, tax shall be deducted at the rate of 20% in case defective/ invalid/ inoperative PAN is submitted by the investor. Further, If the returns for either of the preceding two years are not filed by the investors within the prescribed timelines, then tax would be deducted at source @ 20% as per section 206AB of the Act.
Non-Resident Individual Investors: Tax is required to be withheld in accordance with the provisions of section 195 and other applicable sections of the Income Tax Act, at the rates in force.
The withholding tax shall be at the rate of 40% (in case of companies) / 30% (in case of other than companies) (plus applicable surcharge and cess) or as notified by the Government of India on the amount of interest payable.
However, as per section 90 of the Act, non-resident investors have the option to be governed by the provisions of the Double Tax Avoidance Agreement (‘DTAA’), read with Multilateral Instrument (‘MLI’) between India and the country of tax residence of the investor, if those provisions are more beneficial to them. For this purpose, i.e., to avail the benefits under the DTAA read with MLI, non-resident investor will have to provide the following:
- – Self-attested copy of the PAN card allotted by the Indian income tax authorities.
- – Self-attested copy of Tax Residency Certificate (TRC) for the financial year obtained from the revenue authorities of the country of tax residence;
- — In case, the TRC is furnished in a language other than English, the said TRC would have to be translated to English language and thereafter, a duly notarized and apostilled copy of the TRC would have to be provided.
- – Self-declaration in Form 10F.
- – Any other documents as prescribed under the Act for lower withholding tax rates, if applicable, self-attested by the investor.
Foreign Institutional Investors / Foreign Portfolio Investors: tax will be deducted under Section 196D of the Act @ 20% (plus applicable surcharge and cess) or the rate provided in relevant DTAA, read with MLI, whichever is more beneficial, subject to the submission of the above documents.
