Tax Guide

What is Section 194LD — TDS on interest on government securities/corporate bonds to FIIs?

Key mapping

Section 194LD: TDS at 5% on interest paid to a Foreign Institutional Investor (FII/FPI) or Qualified Foreign Investor (QFI) on Indian government securities, municipal bonds, or certain corporate bonds.

Explanation

Section 194LD of IT Act 1961 (consolidated under §393/§395 in IT Act 2025) provides a concessional 5% TDS rate on interest paid to FIIs/FPIs on: Government securities (G-Secs), State Development Loans (SDLs), municipal bonds, and certain infrastructure bonds where the FPI qualifies. The standard withholding on non-resident interest would be 20% — §194LD provides a significant incentive for FPI investment in Indian bonds. The rate was reduced to 5% from 20% to deepen the Indian bond market. Verify on the income-tax portal before filing.

Related terms and sections

194LD FII FPI TDS government securities 5 percent G-Secs SDL bonds municipal bonds FPI bond investment

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Related sections

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All section references are sourced from the Income Tax Act 2025 (official gazette, incometaxindia.gov.in) and cross-referenced against CBDT's comparative statement. Always verify on the official portal before filing. This page is for reference only and does not constitute legal or tax advice.

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