India: Concessional tax rate unavailable for interest on non-convertible debentures (tribunal decision)
Interest on NCDs did not qualify for the 5% rate, but treaty relief applied to interest from external commercial borrowings.
The Delhi Bench of the Income-tax Appellate Tribunal held that non-convertible debentures (NCDs) and rupee-denominated bonds (RDBs) are distinct financial instruments. Accordingly, interest on NCDs does not qualify for the 5% concessional tax rate applicable to RDBs under the Income-tax Act, 1961.
The tribunal separately held that the taxpayer was the beneficial owner of interest earned from external commercial borrowings and was therefore entitled to the 7.5% rate under the India-Mauritius income tax treaty.
The lead case is: Azure Power Energy Limited v. ACIT
Read a September 2026 report prepared by the KPMG member firm in India