Budget brings listed bonds under TDS from April

Budget brings listed bonds under TDS from April


Most of the budget proposals this year brought cheer for taxpayers on many counts but bond investors had a reason to worry.

As announced in the budget, from April 1, listed bonds (debentures) will attract TDS, or tax deducted at source, of 10% on interest payments. This move is expected to plug the under-reporting of interest income by taxpayers.

Currently, under Section 193 of the Income Tax (I-T) Act, listed bonds are exempt from TDS. “Unlisted bonds are already subject to TDS under the I-T Act,” says Naveen Wadhwa, deputy general manager, Taxmann.

So, will TDS apply on interest payments from all bonds, irrespective of the issuer? No. Section 193 makes reference to “any security issued by a company”.

According to Rajeshree Sabnavis, founder, Rajeshree Sabnavis & Associates, a boutique tax firm, TDS will be applicable only in case of bonds issued by companies. Government bonds, including sovereign gold bonds, shall be exempt from the TDS provision.


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