New Delhi: Rupee-denominated offshore bonds, popularly known as masala bonds, on Wednesday got a tax benefit boost with the Budget exempting them from taxation for transfer among non-residents, while a low rate of 5 per cent will apply for investors till 2020.
The decision to levy lower tax deducted at source (TDS) of 5 per cent with respect to masala bonds would be retrospectively effective from April 1, 2016. Presenting the Union Budget 2017-18, finance minister Arun Jaitley proposed extending the concessional withholding rate of 5 per cent to masala bonds.
“A concessional with-holding rate of 5 per cent is being charged on interest earned by foreign entities in external commercial borrowings or in bonds and government securities. “This concession is available till June 30, 2017. I propose to extend it to June 30, 2020. This benefit is also extended to rupee-denominated (masala) bonds,” he said.
The decision to continue with lower TDS rate for masala bonds has been taken after demands from various stakeholders in this regard.
“It is further proposed to extend the benefit of Section 194LC to rupee-denominated bond issued outside India before July 1, 2020. This amendment will take effect retrospectively from April 1, 2016,” the Budget says.
With respect to transfer of masala bonds among non-residents also, the government has received representations seeking certain exemptions.
