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CMA Final · Direct Tax Laws and International Taxation · Interest and Fees

Under the Income-tax Act, 2025, a foreign company earns interest from an Indian concern on money the concern borrowed in foreign currency. The interest is not infrastructure debt fund interest and is not of the nature covered by section 393(2). At what rate is income-tax payable on this interest under section 207(1)?

The rate is 20%. Section 207(1) taxes interest received from an Indian concern on foreign-currency borrowings at 20% for a foreign company, unless it is infrastructure debt fund interest or interest covered by section 393(2), which carry other rates.

  1. A5%
  2. B10%
  3. C20%Correct
  4. DRates in force

Explanation

Section 207(1), Table serial 3, taxes interest received from Government or an Indian concern on foreign-currency borrowings at 20%, other than interest at serial numbers 4 and 5. Five per cent applies only to infrastructure debt fund interest, and 10% applies to IFSC dividends, not to this interest. Rates in force apply only to the residual income.

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