Buyers Credit

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Guest (Querist)
01 June 2011 Dear Experts,

Pls let me know comparative analysis of Buyers Credit with Indian and Foreign Bank as far as Interest factor is concerned.

Indian Bank provides me Interest of LIBOR + 150 bps whereas foreign Bank offers LIBOR + 100 bps..

Whats withholding tax I need to pay if I opt for Buyers Credit with Foriegn Bank.


Regards,
Rita Paryani

02 June 2011 TDS u/s 195 shall be deductible @ 20.6% .

Also the risk of foreign exchange variation is also there.

Anuj

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02 July 2011 Withholding tax is 10% of the gross amount of the interest on loans made or guaranteed by a bank or other financial institution carrying on bona fide banking or financing business or by an enterprise which holds directly or indirectly at least 10 per cent of the capital of the company paying the interest.

To explain you mathematically.

Foreign Bank BC with Withholding tax

= (L + 1.00) + ((l+ 1.00)*10%)
= (0.25 + 1)+ ((0.25+1)*10%)
= 1.25 + 0.125
= 1.375%

Indian Bank overseas branches

= L + 150
= 0.25 + 1.50
= 1.75

Assumption

- 90 days Transaction USD Libor =0.25

You can also refer below blog which caries good details about Buyers Credit

- buyerscredit.wordpress.com
- Or can get in touch with me on sanjaymandavia@gmail.com, +919825560186


03 July 2011 Here the rate of TDS shall also depend on whether the foreign Bank has a PE in India and whether it has obtained PAN in India.

The rate i quoted previously was as per Income Tax Act. Benefit of specific DTAA of country in which foreign bank is located can also be availed.

Anuj
0-9810106211



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