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Business News/ Money / Personal Finance/  How is interest income on bonds of a listed company taxed?
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How is interest income on bonds of a listed company taxed?

I had invested in bonds of a listed Company with cumulative option for interest
  • I redeemed these bonds on July 15
  • I have received the redemption money with interest after deducting TDS
  • Interest income is generally taxable under the head ‘Income from other Sources”. Photo: MintPremium
    Interest income is generally taxable under the head ‘Income from other Sources”. Photo: Mint

    I had invested in bonds of a listed Company with cumulative option for interest. These bonds have been redeemed on July 15 this year and I have received the redemption money of 1 lakh with 67,595 towards interest after deduction of TDS worth 7,511. I have not shown any interest income in respect of these bonds in the past. My question is whether this total amount 75,106 (67595+7511) will be included in my income of this year or is any relief available to me for interest received for so many year together.

    -Ashok Bhatia 

    By Balwant Jain, Chief Editor, ApnaPaisa

    Income is required to be offered for tax under any of the five heads of income specified under the Income Tax Act. Interest income is generally taxable under the head ‘Income from other Sources". Taxpayers are permitted to offer their income under one of the two methods permitted in respect of income under two head of Income i.e. “Profits and Gains of Business of Profession" and “Income from other Sources".

    The first method is “accrual basis" under which you have to offer the income for taxation as and when the right to receive it accrues to you and , the other is to offer it under “Cash basis" where the income will be offered for tax as and when it is received.

    Since you have not offered the interest income for tax on accrual basis on yearly basis in the past, you will have to offer the entire interest income received for taxation during the year of receipt i.e. the current year. Though there is a provision under Section 89 for grant of relief in case salary for more than twelve months is received in one year, whether in advance or in arrear, there is no similar provision for granting relief in case of income of in the nature of interest.  So you will have to include whole of the interest in current year’s income and pay tax at the slab rates applicable to you.

    (Views as expressed by the expert)

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    Published: 05 Sep 2020, 07:08 AM IST
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