How are the interest income and capital gains from bond investments taxed?

Описание: The interest earned from these bonds is taxable income, and you need to include it under “Income from other sources” while filing your annual income tax return (ITR).

The tax rate applied depends on your income tax slab. This means that if you belong to the 20% tax slab, the interest earned will be taxed at 20%, and so on.

Also, according to the Budget announcement effective from April 1, 2023, under Section 193, all companies that pay interest on securities are now required to deduct tax at a source rate of 10%.

Remember, this amendment applies only to corporates. Therefore, government bonds, including sovereign gold bonds, remain exempt from the TDS provision.

Coming to capital gains, capital gains tax applies when you sell your bonds at a higher price than the purchase price.

The holding period and the type of bond (listed/unlisted) will attract a particular tax rate. The tax on capital gains is classified as Short-term Capital Gains (STCG) and Long-term Capital Gains (LTCG).

These are explained clearly in detail in our blog.

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