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Tax-Saving Infrastructure Bonds: Know how much tax to be paid on maturity and how to avoid TDS

Although the bonds offered tax advantages u/s 80CCF on the time of funding, the curiosity on the bonds is, nevertheless, taxable within the arms of traders.

The tax-saving long-term infrastructure bonds issued within the Financial Year 2011-12 to present deductions up to Rs 20,000 from the taxable earnings beneath part 80CCF of the Income Tax Act are maturing in FY 2021-22.

Although the bonds offered tax advantages u/s 80CCF on the time of funding, the curiosity on the bonds is, nevertheless, taxable within the arms of traders.

So, the tax-saving long-term infrastructure bonds had been principally not the tax-free bonds.

There had been two choices offered to the traders – the annual curiosity payout choice and the cumulative curiosity choice.

While the traders who opted for annual curiosity payouts have already paid the tax on the quantity of curiosity obtained, the traders who opted for the cumulative choice would find yourself paying extra tax than the tax saved within the year of funding.

Infrastructure Bond: Confusion over Tax-Saving Vs Tax-Free Bonds makes taxpayers pay extra tax than profit availed

Taxation

As the curiosity on long-term infrastructure bonds are taxable, the curiosity earned – yearly for the traders opted for annual choice and mixture on maturity for the traders opted for the cumulative choice – by the traders will be added to the taxable earnings of the respective traders.

So, for the traders in decrease tax brackets, tax payable will be decrease and it can be greater for these in greater tax brackets.

TDS

For Resident taxpayers opted for the cumulative choice in bodily format, the curiosity fee will be topic to Tax Deducted at Source (TDS) at 10 per cent for instances the place the curiosity funds upon redemption exceed Rs 5,000.

In case such a bondholder doesn’t have a sound PAN or, in case the investor has not filed his tax returns for the final two years and mixture TDS and TCS in every of these years is Rs 50,000 or extra, the TDS rate will improve to 20 per cent.

No TDS will be relevant for the traders holding the bonds in demat kind.

For Non-Resident taxpayers, TDS at 31.2 per cent would apply on the curiosity payouts.

How to save TDS

To avoid TDS, Resident bondholders have to submit 15G / 15H as relevant. Those who had not offered PAN particulars on the time of funding, want to replace the PAN with the respective RTAs inside the stipulated time given by the respective issuers of the bonds.

Non-Resident bondholders want to submit a tax officer’s order beneath Section 197 / 195 specifying NIL / decrease TDS rate to the respective RTAs inside the stipulated date to be certain that TDS as per charges specified within the order is utilized.

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