Tax free bonds taxation if sold within a week

[Jack_R]

Case1:
Suppose I have bought the NHAI N6 or some NHAI bond from the secondary market from Zerodha and I sell it immediately after a week with a 2% profit. Do I need to pay any tax in such a case?

Case2:
I have bought tax-free bonds in the secondary market using Zerodha. I hold it till its maturity period (say 10 years)
a) Do I need to pay any tax in this case?
b) Will I get the yearly interest if I buy it from the secondary market?
c) What happens after the maturity of 10 years? Suppose I have invested 50k, I am getting yearly interest and now it has matured. What happens to the 50k invested amount? Will that amount be credited back to Zerodha’s account from my Demat?

@Quicko

[Akash_Shah]

@Jack_R

NHAI bond from the secondary market from Zerodha and I sell it immediately after a week with a 2% profit. Do I need to pay any tax in such a case?

Yes. Only interest received from these bonds is tax free. Capital gains is still taxable

@Jack_R

I have bought tax-free bonds in the secondary market using Zerodha. I hold it till its maturity period (say 10 years)
a) Do I need to pay any tax in this case?

If you have a capital gain, yes it will be taxable.

@Jack_R

b) Will I get the yearly interest if I buy it from the secondary market?

Yes, and that will be tax free

@Jack_R

c) What happens after the maturity of 10 years? Suppose I have invested 50k, I am getting yearly interest and now it has matured. What happens to the 50k invested amount? Will that amount be credited back to Zerodha’s account from my Demat?

Both interest and principal amount will be paid back into Bank account linked with demat.

Hope this helps.

[Jack_R]

Thanks

Suppose I bought bonds for 1200 Rs (10 lots) and I hold it till the maturity period of say 10 years.
Now, the bond price is 1300, so how much amount will be credited to my bank? 1300X10 or 1200X10?
If it is 1300X10, do I need to pay STGC on the (1300-1200) = 100X10?

Note: I have not sold it, it has matured. In such case also do we need to pay the STCG?

[Irrational_Mind]

Your redemption will be at face value. Assuming the face value is 1000 Rs, you will receive 1000x10 + interest for the year on redemption date.

And based on my understanding you can claim (1200 - 1000) as long-term capital loss.

And if holding period is less than 1 year, you can claim short term capital loss. Income Tax on Bonds & Debentures - Learn by Quicko @Quicko

[Quicko]

@Jack_R

Suppose I have bought the NHAI N6 or some NHAI bond from the secondary market from Zerodha and I sell it immediately after a week with a 2% profit. Do I need to pay any tax in such a case?

Yes, it is considered as STCG taxed at slab rates.

@Jack_R

Do I need to pay any tax in this case?

Yes, it will be considered LTCG and will be taxable at 20%.

@Jack_R

Will I get the yearly interest if I buy it from the secondary market?

Yes, you will get annual interest and that will be taxed under the head IFOS at slab rate.

@Jack_R

What happens after the maturity of 10 years? Suppose I have invested 50k, I am getting yearly interest and now it has matured. What happens to the 50k invested amount? Will that amount be credited back to Zerodha’s account from my Demat?

At the time of maturity, you will get the amount invested back along with interest of that year and will be credited to your bank account.

@Jack_R

Now, the bond price is 1300, so how much amount will be credited to my bank? 1300X10 or 1200X10?
If it is 1300X10, do I need to pay STGC on the (1300-1200) = 100X10?

Yes, you will have to pay tax on STCG. However, bonds are generally redeemed at their face value which is generally ₹1,000 or ₹10,000.

Hope this helps!

[Abhishek_Kumar5]

@Quicko

Yes, you will get annual interest and that will be taxed under the head IFOS at slab rate.

Do you mean the interest is only tax free if it’s bought when issued and is taxable when bought in secondary market?
Can you please explain this a bit more.