Borrowing tax cut: India to get $2 bn more

The government’s decision to reduce the withholding tax on overseas borrowings to 5% from 20% could boost India’s inflow by an additional $2 billion per year in the medium term, says a report by Barclays Capital.

The government’s decision to reduce the withholding tax on overseas borrowings to 5% from 20% could boost India’s inflow by an additional $2 billion per year in the medium term, says a report by Barclays Capital.

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This would be seen as an indication of the government’s resolve to continue to take positive steps to revive the sagging investor sentiment, the note added.

“While the political stalemate continues, the recent developments indicate that the government is unlikely to face near term threats, given the support of the Samajwadi Party,” Barclays Capital said, adding that the government is unlikely to roll-back its recent measures completely.

The new tax slab would be applicable for funds borrowed between July 1, 2012 and June 30, 2015.