For Tax Free Bonds such because the IRFC (INE053F07652) BOND 8.23% PA TF TI-SIA,(DATE OF MATURITY 18/02/2024) which is presently buying and selling at 1080.
Suppose I purchase on 6/10/22 100 items for 1080 – Rs. 1,08,000Future Curiosity cashflows18/2/23 – Rs. 8,23018/2/24 – Rs. 8,230Principal Compensation – 18/2/24 – Rs. 1,00,000
Few factors.
If I purchase it from secondary market like NSE/BSE I’m eligible for tax free curiosity advantages.
Curiosity funds of Rs. 16,460 are tax free.
@Quicko are you able to please inform the proper approach to consider the capital positive aspects or loss
If I maintain until maturity I get again Rs. 1,00,000a. Can I guide lack of Rs.8,000 (logic being I paid 1.08L for the safety and 1L on maturity) as capital loss in FY 24 ?b. The capital loss must be evaluated on the clear value on the time of shopping for the bond which might be 1080-(82.3*0.75(roughly the quantity of curiosity interval that will have accrued on fifth Oct)) which makes it Rs. 1018, so assuming the clear value of acquisition can I declare Rs. 1800 as Capital Loss ?c. No capital loss or achieve could be claimed at time of maturity.
Similar query as 3 however this time I promote earlier than maturity in secondary market relying on the worth offered at can I declare capital loss/achieve and do I would like to contemplate the clear value at time of shopping for and promoting or the calculation could be performed on soiled value additionally.
@Jason_Castelino @nithin @Karthik Please weigh in if the proper tax remedy for the capital achieve/loss half on a tax free curiosity Bond.
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These aren’t 54EC Bond so far as I do know, if you happen to go to the cdsl bond hyperlink I shared it mentions
If Tax free – Part of The Earnings Tax Act,1961:Underneath Part 10(15)(iv)(h)
and the above part mentions in regards to the curiosity half being free for the bonds issued beneath the above part.
Pratyush_Raj:
If I purchase it from secondary market like NSE/BSE I’m eligible for tax free curiosity advantages.
Curiosity funds of Rs. 16,460 are tax free.@Quicko are you able to please inform the proper approach to consider the capital positive aspects or loss
If I maintain until maturity I get again Rs. 1,00,000a. Can I guide lack of Rs.8,000 (logic being I paid 1.08L for the safety and 1L on maturity) as capital loss in FY 24 ?b. The capital loss must be evaluated on the clear value on the time of shopping for the bond which might be 1080-(82.3*0.75(roughly the quantity of curiosity interval that will have accrued on fifth Oct)) which makes it Rs. 1018, so assuming the clear value of acquisition can I declare Rs. 1800 as Capital Loss ?c. No capital loss or achieve could be claimed at time of maturity.
Similar query as 3 however this time I promote earlier than maturity in secondary market relying on the worth offered at can I declare capital loss/achieve and do I would like to contemplate the clear value at time of shopping for and promoting or the calculation could be performed on soiled value additionally.
1 & 2. Curiosity funds will stay tax-free even if you happen to purchase these bonds from the secondary market.3 & 4. You possibly can think about soiled value as price at all times, no matter whether or not you maintain until maturity or exit. Making use of the clear value technique could also be tougher to rationalise with the Earnings Tax Workplace in case your returns are scrutinised and you haven’t employed the identical accounting ideas constantly.
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When you’re contemplating investing in tax-free bonds, it’s necessary to know the tax remedy of the capital positive aspects and losses on these bonds. Any capital achieve or loss is handled as if it occurred on a taxable bond whenever you promote a tax-free bond. It means you’ll pay taxes on any income however received’t get a deduction for any losses. Which means you’ll pay taxes on any positive aspects however received’t get a deduction for any losses. So, if you happen to’re serious about investing in these kind of bonds, it’s one thing to bear in mind.
mohitmehra:
Making use of the clear value technique could also be tougher to rationalise with the Earnings Tax Workplace in case your returns are scrutinised and you haven’t employed the identical accounting ideas constantly.
The rationale I’m saying to make use of clear value is as a result of in soiled value there could be situations the place one should purchase the bond at let’s imagine 1080 simply earlier than the curiosity fee date after which promote the bond simply after the curiosity is acquired at round 1000 (assuming the coupon yield is 8%) I’ll have tax free curiosity revenue and I may declare capital lack of 80, so clear value sounds most applicable to me however couldn’t discover any good useful resource on the best way it ought to be computed.
Rohan_Rajput:
It means you’ll pay taxes on any income however received’t get a deduction for any losses.
Are you able to please share some useful resource, all of the articles I’ve learn speak about each capital positive aspects and capital loss on bonds – similar to Hyperlink
You’ve gotten understood it proper. You may be taxed on the relevant tax fee for the Capital positive aspects on sale of tax-free bonds on inventory change that was held for a interval of lower than 12 months. Equally, whether it is held for greater than 12 months, the positive aspects can be taxed at 10.3%.
Rohan_Rajput:
however received’t get a deduction for any losses
What do you imply by no deduction for losses right here ? Are you saying if one has capital positive aspects they should pay taxes but when there’s capital loss then that loss can’t be used to offset different capital positive aspects or carry forwarded to subsequent years as is allowed for different capital loss eventualities.
Hello @Pratyush_Raj
For Tax-Free Bonds such because the IRFC, the curiosity fee will stay tax-free even if you happen to purchase from NSE/BSE. Therefore the curiosity fee of Rs. 16,460 is tax-free. You possibly can commerce these bonds in secondary markets earlier than the maturity interval. The achieve/loss can be computed based mostly on the sale worth and the preliminary worth of the particular funding within the secondary market. No capital loss or achieve could be claimed on the time of maturity.
Right here’s a learn on Earnings Tax on Bonds & Debentures – Study by Quicko on your reference.
Quicko:
No capital loss or achieve could be claimed on the time of maturity.
Are you able to please broaden on this, if that’s the case then if somebody buys a bond at low cost from face worth say 900 and holds until maturity, and when 1000 is returned as principal, is the Rs.100 tax free ?Or will it’s taxable and if that’s the case which head will it go beneath ?
@Quicko Are you able to please elaborate
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Hey @Pratyush_Raj
Normally the curiosity on bonds is taxable beneath the top of Earnings from Different Sources. Nonetheless, in case of tax-free bonds the curiosity is exempt.
The achieve on sale of such bonds is taxable beneath the top of Earnings from Capital Good points.
Hope this helps!
The achieve on sale of such bonds is taxable beneath the top of Earnings from Capital Good points.
What in regards to the achieve or loss on redemption at maturity, which is what @Pratyush_Raj has been making an attempt to ask (And I’m additionally taken with realizing about.)?
Additionally: might you please quote the related rule/round/… which lays the half about capital achieve/loss on redemption at maturity (not sale out there)?
Thanks.
Hey @ZeroIndian,
The taxability of achieve on redemption of bonds held until maturity is defined by the next circumstances:
If the bond was issued at low cost and redeemed at par – The distinction between Invested worth and redeemed worth can be taxed beneath Earnings from capital positive aspects. (Bonds aren’t issued at low cost in India anymore, nonetheless, if you buy bonds at a reduced value from the secondary market then capital positive aspects shall come up)
If the bond was issued and redeemed at par – No capital achieve shall come up on this state of affairs.
Hope this helps!
Hello @Quicko @mohitmehra
I’ve a number of queries. Can be useful if u might reply.I’m utterly new to bonds.
My buddy has 40lac corpus. Desires to take a position solely in Tax Free bonds or G-sec/FDShe’s not curiosity in fairness/MFs. Desires VERY secure investments solely.
My queries:
I learn that retail traders can solely make investments upto 2lac Rs in tax-free bonds. Is that this appropriate?
Is it true that Govt/PSUs have stopped issueing new tax-free bonds and solely manner to purchase tax-free bonds is from NSE/BSE?
My buddy desires curiosity revenue.Her holding interval is 3-5 yearsWhich bonds could be greatest for her?As a place to begin, can u plz counsel which bonds could be advisable?