The Finance Ministry is working on a proposal to reduce the incidence of withholding tax on external commercial borrowings (ECB) to encourage Indian companies to raise funds from overseas markets.
“We are trying to work out a mechanism to bring down withholding tax for entire ECB… and long-term infrastructure corporate bonds,” a senior Finance Ministry official said.
Former finance minister Pranab Mukherjee in his budget for 2012-13 in May had proposed to slash withholding tax from 20 per cent to 5 per cent across the board for all businesses.
“To further facilitate access to such borrowings,I propose to extend the lower rate of withholding tax to all businesses,” Mukherjee had said in the Lok Sabha in May.
To help the cash-starved sectors,the former finance minister had opened access to ECBs to sectors like aviation,which can raise overseas funds as working capital for a period of one year under the sectoral ceiling of USD 1 billion.
Sectors like affordable housing,power (refinancing of rupee loans) and road (for maintenance of toll roads) were also given access to overseas loans in the Budget.