Circular issued on conditions applicable for lower interest withholding tax rate of 5%

The Indian Central Board of Direct Taxes issued Circular No. 7 of 2012 dated 21 September 2012 in relation to foreign borrowings by Indian companies. The Finance Act 2012 introduced section 194LC in the Income Tax Act 1961 (ITA) to lower the withholding tax rate from 20% to 5% on interest payments by Indian companies for borrowings made in foreign currency, i.e. under a loan agreement or issue of long-term infrastructure bonds. Previously, the approval of the Central Government was require…