The government on Monday announced tax exemption on interest payable by Indian companies to non-residents, including foreign companies, on "masala bonds" issued till March 31, 2019.
Till now, interest payable on such bonds issued before July 1, 2020 was liable for concessional rate of tax of five per cent.
The announcement came following Prime Minister Narendra Modi's economic review meeting on Friday, after which Finance Minister Arun Jaitley had announced a multi-pronged strategy to contain the Current Account Deficit (CAD) and augment the foreign exchange inflow.
"In this background, low-cost foreign borrowings through off-shore rupee denominated bonds (also called masala bonds) have been further incentivised to increase the foreign exchange inflow," an official statement said.
"Consequently, no tax shall be deducted on the payment of interest in respect of the said bond," it said, adding that legislative amendments in this regard shall be proposed in due course.
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