TDS on zero coupon bond bought near to maturity

Bonds
1

IIFL Fin Ltd * INE866I08311. I bought these bonds 6 month before maturity. maturity value is 1776 ( original issue value is 1000). i want to know if TDS will be deducted on entire 776 gain or value of gain for me which is Rs 35 per bond.

  • Is bond gain added to income and taxed at applicable slab or there is any other consideration for tax calculation other than buying date( before aug 2023 or not)
2

Yes, that’s my understanding.
The issuer will not be aware of any gains/losses one may have faced
based on the price one purchases it at, in the secondary market.

3

These aren’t actually a zero coupon bonds, but cumulative interest paid bonds.

Zero Coupon bonds are generally issued at discount to face value.
These bonds are issued at face value and youa re getting cumulative interest at maturity.

About TDS - yes TDS will be deducted on full interest amount, and not only on your gain.

In fact the tax treatment of this is also slightly different, and not straight forward as adding gain to your income.
Assume you bought these bonds at 1600
At maturity you will get = FV of rs. 1000 + interest of 776

Now, 776 interest is income from other source and you will be liable to pay tax on full 776 at your slab rate.
You also made a STCG loss of 600 which is capital gains and you can only adjust it against other capital gains (but not against income from other sources)

In case you have no other capital gains, you can carry forward the loss, but still you will have to pay tax at sslab on entire gain of 776.

1 Like
4

Thanks for your detailed reply. Can this capital loss be adjusted against long term capital gain in equities?

5

Can this capital loss be adjusted against long term capital gain in equities?

6

yes. This article might be helpful
Set Off and Carry Forward of Losses under Income Tax - Learn by Quicko