TAX ON CUMULATIVE INTEREST BONDS

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Listed IFCI cumulative bond bought at Rs. 44,000 and redeemed at Rs. 46,255 raises taxability query. Experts clarified that only Rs. 2,255 gain is taxable as Short Term Capital Gain, not Rs. 36,255 as interest income.

chanchal mal bachhawat

chanchal mal bachhawat (Querist)
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06 May 2026 If a person buys through Stock Exchange Listed 10.75 IFCI Bonds due for redemption on 1.8.26 at Rs. 44000 ( Face Value Rs. 10000, with a tenure of 15 years) which are to be redeemed at Rs. 46255/- only on 1.8.2026, will he be taxed on Rs. 36,255 as Interest under Income from Other Sources or on Rs. 2,255/= only as Interest,i.e., being the difference between Redemption Price and Purchase Price. Since these are not Zero-coupon Bonds, these are not eligible to be shown as Short Term Capital Gains if held upto maturity. Shall be grateful for Opinion.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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06 May 2026 The amount of ₹ 2,255 should be treated as Capital Gains, not interest. Since the bonds were purchased and then redeemed on 1.8.2026 (implying a very short holding period if bought recently), this would be Short-Term Capital Gain (STCG) taxable at slab rates.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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06 May 2026 Taxable Amount: ₹ 2,255 (Redemption Price - Purchase Price).
Head of Income: Capital Gains (Short-Term, as the holding period in this specific transaction appears to be less than 12 months).
Reasoning: The investor is only liable for the appreciation in value during their period of ownership. The underlying interest accrued prior to their purchase is already reflected in the higher purchase price paid to the seller.

chanchal mal bachhawat

chanchal mal bachhawat (Querist)
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06 May 2026 Thanks a lot. I stand clarified. I highly appreciate very prompt reply.

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