The government on Monday exempted tax for interest from the income on specified off-shore rupee-denominated bonds.

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"Interest payable by an Indian company or a business trust to a non-resident,

including a foreign company, in respect of rupee-denominated bond issued outside India before July 1, 2020, is liable for concessional rate of tax of 5 percent, the central board of direct taxation (CBDT) said in a statement.

According to the multi-pronged strategy announced by finance minister Arun Jaitley to contain the current account deficit (CAD) and augment the foreign exchange inflow the low-cost foreign borrowings through off-shore rupee

denominated bond have been further incentivised to increase the foreign exchange inflow, it said.

Aimed at increasing inflow and reducing the outflow of dollars, the government on Friday announced five measures. The announcement also included two measures related to masala bonds, which are bonds issued outside India but denominated in Indian rupees.

In line with the government's decision, the interest payable by an Indian company or a business trust to a non-resident, including a foreign company, in respect of rupee-denominated bond issued outside India during the period from September 17, 2018, to March 13, 2019, shall be exempt from tax, and no tax shall be deducted on the payment of interest in respect of the said bond under section 194 LC of the Act, according to the statement issued by CBDT.

First Published:Sept 17, 2018 6:56 PM IST