Debenture interest

14413 views 4 replies

Suman Karanth

Senior Manager

24 Points Posted on 18 June 2012

As an individual, my mother invested 20,00,000 in a debenture instrument (titled Nifty Linked Debenture) offered by an issuer with a certain interest component. After 3 years, the said instrument matured with an interest of Rs. 4,80,000 ( @ 24% for 3 years).

My mother is retired & her total income including pension, other FD interests, etc does not exceed 5,50,000 approx for FY 2011-12. Kindly let me know what are the tax implications on the debenture interest. Also can this debenture interest be set off against any other head?

Thanks & Regards

Suman

Replies (4)

Devendra

Chartered Accountant

4780 Points Posted on 18 June 2012

Debenture Interest shall be taxable in your Mother's hands. Also the company paying the Interest must have deducted TDS on Interest on Debentures, so ask them if they have deducted any TDS on the Interest paid.

And only Losses can be set-off aginst Income. Income earned cannot be set-off by any other Income Source.

Regards,

Devendra Kulkarni

Trupti Pawar

BE Final year icwai

34 Points Posted on 18 June 2012

Tax Implications- Investment in Debentures

􀂾 Interest income

• Interest received by debenture holder is taxable @ 33.99%

􀂾 Profits from sale /transfer of Debentures

• If considered as capital gains (capital gains = sale consideration – cost of acquisition

–expenses incurred in connection with such transfer)

Capital Gains Long- term Capital Gains Short-term Capital Gains

Period of holding Rate Period of holding Rate

Listed debentures

(where STT Paid)

More than 1 year 11.33% 1 year or less 33.99%

Unlisted debentures More than 3 year 22.66% 3 years or less 33.99%

• If Considered as business income-net income taxable @ 33.99%

Mahavir

Student

161 Points Posted on 18 June 2012

Interest is taxable under the head Other Sources, and tax is to be paid as per Income Tax Slab. Any Tax deducted at source is also adjusted against the tax liability.