Deep Discount Bond

This query is : Resolved 

18 July 2009

Wheather Deep Discount Bond of Sardar Sarovar Narmada Nigam Limited is taxable? if no than what will be the treatment.

B.Chackrapani Warrier (Expert)
18 July 2009

Each bond's discounted value was Rs 3,600/- when issued in 1993. On maturity on January 2014, the SSNNL was supposed to give Rs 1.11 lakh against every bond.

Regarding the taxability of deep discount bond pl refer CBDT Circular No.2 of 2002 dated 15/02/2002 reported in 254 ITR 241.

CMA Gul S (Expert)
18 July 2009

If the company is paying you some maturity value and did not say the diffarnece between the purchase pice and sale as interest, then the diffarence will be treated as long term capital gains. In this case you have to pay long term capital gains @20% on the indexed gains.

If the diffarence is treated by company as Interest then:
The interest will be added to your income. You have to pay the tax as per your slab. Suppose your salary is 2 lakhs per year. S S Nigam interest is 40,000. Then your income will become 2.4 lakhs and you have to pay 10% tax. as per the slab rates given below.

If your income is between 1.6 lakhs to 3 lakhs then tax rate will be 10%

If your income is between 3.0 lakhs to 5 lakhs then tax rate will be 20%

If your income is avong 5 lakhs then the tax rate will be 30%

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