Explanation
Section 194LC of IT Act 1961 (consolidated under §393/§395 in IT Act 2025) provides a concessional 5% TDS rate to encourage Indian companies to borrow foreign currency. Applies to: ECBs (External Commercial Borrowings) approved by RBI, foreign currency bonds listed on recognised exchanges, rupee-denominated ('masala') bonds. The borrowing must be between 1 July 2012 and 31 March 2026 (extended periodically; verify current sunset date). FPIs also qualify for this rate on interest from masala bonds. Rate: 4% for government securities and SDLs to FPIs/FIIs from 2020. Verify on the income-tax portal before filing.