NCRPS (cumulative non-convertible redeemable preference shares) Redemption and Coupon Payment
This query is : Resolved
27 March 2024
Hi Team,
TVS Holdings redeemed NCRPS on 22-MAR-2024.
Refer news: https://www.thehindu.com/business/tvs-holdings-plans-to-redeem-ncrps-on-march-25/article67899429.ece
On 16-JUN-2023 , 232 NCRPS were credited on my trading account.
On 22-MAR-2024, I received Total Amount : RS 2528.8
Breakdown of the amount:
Redemption Amount: RS 2320
Coupon Payment: RS 208.8
Could you please confirm how above amounts would be taxed?
As the NCRPS are redeemed within a year (i.e. matured and NOT SOLD) , is Redemption Amount : RS 2320 STCG and taxable as per Income Tax Slab rate?
Also is Coupon Payment taxation same as Dividend/Interest? i.e. is Coupon Payment of RS 208.8 STCG and taxable as per Income Tax Slab rate?
TVS Holdings redeemed NCRPS on 22-MAR-2024.
Refer news: https://www.thehindu.com/business/tvs-holdings-plans-to-redeem-ncrps-on-march-25/article67899429.ece
On 16-JUN-2023 , 232 NCRPS were credited on my trading account.
On 22-MAR-2024, I received Total Amount : RS 2528.8
Breakdown of the amount:
Redemption Amount: RS 2320
Coupon Payment: RS 208.8
Could you please confirm how above amounts would be taxed?
As the NCRPS are redeemed within a year (i.e. matured and NOT SOLD) , is Redemption Amount : RS 2320 STCG and taxable as per Income Tax Slab rate?
Also is Coupon Payment taxation same as Dividend/Interest? i.e. is Coupon Payment of RS 208.8 STCG and taxable as per Income Tax Slab rate?
09 July 2024
To clarify the tax treatment of the amounts received from the redemption of Non-Convertible Redeemable Preference Shares (NCRPS) and the coupon payment, we need to consider how each component is treated under the Indian Income Tax Act.
1. **Redemption Amount:**
- The redemption of NCRPS is considered a transfer of capital assets.
- Since the NCRPS were held for less than 12 months, the gains from redemption are treated as Short-Term Capital Gains (STCG).
- STCG on listed securities (like NCRPS) are taxable at the applicable income tax slab rates.
2. **Coupon Payment:**
- The coupon payment on NCRPS is treated as interest income, not as capital gains.
- Interest income is taxable under the head "Income from Other Sources."
- It is taxed at the individual's applicable income tax slab rate.
### Breakdown of the Tax Treatment
1. **Redemption Amount: ₹2320**
- Since the NCRPS were redeemed within a year, this amount is subject to STCG.
- The STCG is taxable as per your applicable income tax slab rate.
2. **Coupon Payment: ₹208.8**
- This amount is considered as interest income.
- It is also taxable as per your applicable income tax slab rate.
### Summary
- **Redemption Amount (₹2320):** Treated as STCG and taxed according to the applicable income tax slab rate.
- **Coupon Payment (₹208.8):** Treated as interest income and taxed according to the applicable income tax slab rate.
### Action Points
- Include the redemption amount of ₹2320 under "Short-Term Capital Gains" in your income tax return.
- Include the coupon payment of ₹208.8 under "Income from Other Sources" in your income tax return.
Ensure you maintain all relevant documentation, including transaction statements and Form 16A (if TDS was deducted), to support your declarations during income tax filing.
1. **Redemption Amount:**
- The redemption of NCRPS is considered a transfer of capital assets.
- Since the NCRPS were held for less than 12 months, the gains from redemption are treated as Short-Term Capital Gains (STCG).
- STCG on listed securities (like NCRPS) are taxable at the applicable income tax slab rates.
2. **Coupon Payment:**
- The coupon payment on NCRPS is treated as interest income, not as capital gains.
- Interest income is taxable under the head "Income from Other Sources."
- It is taxed at the individual's applicable income tax slab rate.
### Breakdown of the Tax Treatment
1. **Redemption Amount: ₹2320**
- Since the NCRPS were redeemed within a year, this amount is subject to STCG.
- The STCG is taxable as per your applicable income tax slab rate.
2. **Coupon Payment: ₹208.8**
- This amount is considered as interest income.
- It is also taxable as per your applicable income tax slab rate.
### Summary
- **Redemption Amount (₹2320):** Treated as STCG and taxed according to the applicable income tax slab rate.
- **Coupon Payment (₹208.8):** Treated as interest income and taxed according to the applicable income tax slab rate.
### Action Points
- Include the redemption amount of ₹2320 under "Short-Term Capital Gains" in your income tax return.
- Include the coupon payment of ₹208.8 under "Income from Other Sources" in your income tax return.
Ensure you maintain all relevant documentation, including transaction statements and Form 16A (if TDS was deducted), to support your declarations during income tax filing.
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