The government is looking to cut withholding tax rate for foreign investments in all types of corporate bonds, as it eyes fresh measures to top up the budget proposals when finance minister P Chidambaram replies to the debate in parliament. Under current norms, foreign investments in corporate bonds face 20% tax deduction. A lower withholding tax of 5% is available only in select infrastructure sectors. The high 20% withholding tax is adjustable against the final tax liability of the investor, but it is seen as an irritant by foreign investors.

Source - http://economictimes.indiatimes.com