Regarding tds on payment of interest on bond
This query is : Resolved
09 November 2015
while making payment of interest on bond tds is deducted?
The bond is in demat form.
The bond is in demat form.
20 July 2025
Yes, TDS is generally required to be deducted on interest paid on bonds, including bonds held in dematerialized (demat) form.
Key points:
Under Section 194A of the Income Tax Act, any person responsible for paying interest (other than interest on securities) must deduct TDS at 10% if the interest amount exceeds Rs. 5,000 in a financial year.
However, interest on certain bonds/debentures (like government securities or certain specified bonds) is treated as interest on securities under Section 193, where TDS is also applicable (usually at 10%, but can vary).
For bonds held in demat form, the interest is credited to your account electronically, but this does not exempt it from TDS.
The entity making the interest payment (like the issuer or the trustee) is responsible for deducting TDS before crediting your account.
If the interest is exempt (like some tax-free bonds), then no TDS is deducted.
In short:
If the bond interest payment exceeds Rs. 5,000 in a financial year and the bond interest is taxable, the payer must deduct TDS at applicable rates before crediting the interest to you, regardless of whether the bond is in physical or demat form.
Key points:
Under Section 194A of the Income Tax Act, any person responsible for paying interest (other than interest on securities) must deduct TDS at 10% if the interest amount exceeds Rs. 5,000 in a financial year.
However, interest on certain bonds/debentures (like government securities or certain specified bonds) is treated as interest on securities under Section 193, where TDS is also applicable (usually at 10%, but can vary).
For bonds held in demat form, the interest is credited to your account electronically, but this does not exempt it from TDS.
The entity making the interest payment (like the issuer or the trustee) is responsible for deducting TDS before crediting your account.
If the interest is exempt (like some tax-free bonds), then no TDS is deducted.
In short:
If the bond interest payment exceeds Rs. 5,000 in a financial year and the bond interest is taxable, the payer must deduct TDS at applicable rates before crediting the interest to you, regardless of whether the bond is in physical or demat form.
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