TDS on interest paid on ECB Loan reduced to 5%

Although this was indicated in this year Budget it was not yet announced. Mr PC who is very aggressive now a day on economic reform has done it .It is really good news for the Overseas Lender who are Lending to Indian Companies and Indian Companies as well. In a surprising move Government of India has cut tax on interest earned by overseas holders of Indian debt.  Henceforth Indian Borrower will have to deduct Tax @ 5% instead of 20% earlier this is to encourage more borrowings at very low costs abroad. The cut in this tax, a levy on interest earned by overseas investors in foreign-currency debt issued by Indian companies, will make it easier and cheaper for Indian Companies to access overseas funds and shave lot .Interest rates are among the highest in India among all the big economies at present, and reduction in the cost of borrowing to revive growth is essential. It is expected that Overseas Borrowing cost will come down by 75bps by this move which is a substantial savings for Corporate taking ECB Loan. In practice these tax Cost was loaded in the interest cost which will now come down . 

The detailed Notification issued by Ministry of Finance is attached in the following link

http://www.finmin.nic.in/the_ministry/dept_revenue/loanAgr_LongTrInfra_RoI_ITAct1961.pdf