INFRA BONDS.

This query is : Resolved

anckoora (Querist)
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12 February 2011 DEAR SIR,

(1)INVESTMENT IN INFRASTRUCTURE BONDS GETS EXEMTION UNDER SECTION 80CCF. LIMIT OF INVESTMENT IS 20000/- RIGHT ?
(2) WHAT ABOUT INTEREST RECD ON IT ? IS IT TAXABLE OR EXEMPTED ?
THANKS
ANCKOORA.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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12 February 2011 The interest on Bonds will be subject to deduction of tax at source at the rates prevailing from time
to time under the provisions of the Income Tax Act or any statutory modification or re-enactment
thereof. As per the current provisions of the Income Tax Act, on payment to all categories of
resident Bondholders, tax will not be deducted at source from interest on Bonds, if such interest
does not exceed Rs. 2,500 in a financial year.
As per clause (ix) of Section 193 of the Income Tax Act, no income tax is required to be withheld
on any interest payable on any security issued by a company, where such security is in
dematerialized form and is listed on a recognized stock exchange in India in accordance with the
Securities Contracts Regulation Act, 1956, as amended, and the rules notified there under.
Accordingly, no income tax will be deducted at source from the interest on Bonds held in
dematerialized form. In case of Bonds held in a physical form no tax may be withheld in case the
interest does not exceed Rs. 2,500. However, such interest is taxable income in the hands of
resident Bondholders.
If interest on Bonds exceeds the prescribed limit of Rs. 2,500 in case of resident individual
Bondholders, to ensure non-deduction or lower deduction of tax at source, as the case may be,
the Bondholders are required to furnish either (a) a declaration (in duplicate) in the prescribed
form i.e. Form 15G which may be given by all Bondholders other than companies, firms and nonresidents subject to provisions of section 197A of the Income Tax Act; or (b) a certificate, from the
assessing officer of the Bondholder, in the prescribed form under section 197 of the Income Tax
Act which may be obtained by the Bondholders. Senior citizens, who are 65 or more years of age
at any time during the financial year, can submit a self-declaration in the prescribed Form 15H for
non-deduction of tax at source in accordance with the provisions of section 197A even if the
aggregate income credited or paid or likely to be credited or paid exceeds the maximum limit for
the financial year. These certificates may be submitted to the Company or to such person at such
address as may be notified by us from time to time, quoting the name of the sole or first
Bondholder, Bondholder number and the distinctive number(s) of the Bond(s) held, at least one
month prior to the interest payment date.
Tax exemption certificate or document, if any, must be lodged at the office of the Registrar prior to
the Record Date or as specifically required. Tax applicable on coupon will be deducted at source
on accrual thereof in the Company's books and / or on payment thereof, in accordance with the
provisions of the Income Tax Act and / or any other statutory modification, re-enactment or
notification as the case may be. A tax deduction certificate will be issued for the amount of tax so
deducted on annual basis.

Courtesy :- IFCI Ltd.