Interest From Deposits, Bonds Taxable
Bonds & Deposits
Long-term bonds from corporate entities or the Government are great for long-term regular income - but did you know that the interest you receive from some of these is also taxable?
Tax On Bank Deposits
Bank deposits are seen as a safe bet when it comes to prioritising. But, even a 7% interest rate advertised by the bank can incur 4.8% a year of net tax.
Tax On Bonds & Deposits
Just like interest earned on bank deposits attracts tax, interest earned on bonds issued by the Government and corporate entities also attracts tax.
How Bonds Work: Investing
Bonds and deposits are financial securities where you invest a lump sum for a specified amount of time.
How Bonds Work: Interest Earned
You receive a predetermined interest payout at fixed intervals. At the end of the tenure, you will get your original amount and last interest instalment.
You will have to add interest received from bank deposits & bonds after you have added your salary & made adjustments to it. Interest income is included in overall income for tax purposes.
TDS: Bonds & Deposits
A 10% rate of TDS applies to interest received from corporate or government bonds and corporate deposits.
TDS: Corporate Bonds
However, the threshold of interest income received is lower (Rs 5000) for interest from corporate deposits to be eligible for TDS.
Any tax already paid on the interest can be shown as part of your tax returns & adjusted against the tax liability calculated for the interest received, as long you get a TDS certificate.
There are Government bonds like Tax-Free Bonds, where the interest received is specifically exempt from tax.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.