Clarification on continuation of concessional rate of tax on certain interest income of the FPIs by CBDT



Quick Summary
The Central Board of Direct Taxes (CBDT) has issued a clarification regarding the tax rate on interest income for Foreign Portfolio Investors (FPIs). Contrary to some media reports, the concessional tax rate of 5% on interest income referred to in Section 194LD of the Income-tax Act, 1961, has not been withdrawn. This rate continues to apply even after recent amendments to Section 115AD.

Section 115AD of the Income-tax Act, 1961 (the 'Act') inter alia contains provisions for taxation of income of FPIs. Proviso to section 115AD(1)(i) provides that the tax shall be chargeable at the concessional rate of 5% on interest income referred to in section 194LD.

FPIs: Concessional Tax Rate on Interest Income Continues

There are reports in certain section of media that the said concessional tax rate of 5% has been withdrawn. It is hereby clarified that there is no change in the said proviso even after amendment of Section 115AD vide Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and the concessional rate of tax of 5% shall continue to be applicable for interest income referred to in section 194LD of the Act.

FAQ :

The CBDT has clarified that the concessional tax rate of 5% on certain interest income for FPIs remains in effect.

Section 115AD of the Income-tax Act, 1961, contains provisions for the taxation of income of FPIs.

The concessional rate of 5% applies to interest income referred to in Section 194LD of the Act.

No, the CBDT has clarified that there is no change and the concessional tax rate of 5% continues to be applicable.

No, the CBDT states that the concessional tax rate of 5% shall continue to be applicable even after the amendment of Section 115AD.




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