Interest on infrastructure bonds

Tax queries 8909 views 8 replies

Ankit

Professional

82 Points Joined November 2009

Hi Everyone,

I had a query regarding Interest on Infra Bonds. There are two treatment that I have heard of regarding the same.

First is to charge Interest on Infra bonds under the head Income from othere sources .

Secondly, Since the interest is not piad yearly rather it is paid at the end of investment period. So the amount which will be received after the invesmtent period should be considered as Full Value of Conseideration and the amount iinvested will be treated as cost of a cquisition and it will be Indexed and according Capital Gain would be paid in that year.

Can everyone help me in this area as to which one of this more appropriate ?

Thanks,

Ankit

Replies (8)

Parihar Gopal

Corporate Taxation

392 Points Joined November 2009

hi dear ,

Taxability of interest on Bonds would depend upon the method of accounting adopted by the resident Bondholder as mentioned in the provisions of the IT Act. U/S 145 relates to method of accounting followed by assessee for taxability of income. This can be applied for Heads "PGBP" and "Income from other sources". you can show the interest on Accrual basis/receipt basis (ie on maturity) but the method followed should be consistent. Interest earned on these infrastructure bonds is chargeable to tax at normal tax rates. Interest can not be considered for capital gain.

Ankit

Professional

82 Points Joined November 2009

Thanks budy :)

Lalit Nagpal

Assistant Manager

541 Points Joined April 2009

Hi All

What about Taxability of Infra bonds if we are selling after maturity in market and getting Capital gain.

how will we calculate capital gain in this case and what will b rate.

Parihar Gopal

Corporate Taxation

392 Points Joined November 2009

SAME AS LONG TERM CAPITAL ASSETS

@CS Siddharth Bumb.

B.Com CA Final CS

5270 Points Joined September 2009

AGREE WITH MR PARIHAR GOPAL

aanchal rawat

JOB

22 Points Joined July 2015

But how to calculate LTCG. as maturity value of bonds include interest component also.

Parihar Gopal

Corporate Taxation

392 Points Joined November 2009

Hi,

Pl Exculde the Interest Componets for Claculating LTCg, Interest componet is taxbble under -other source income

Vaibhav Joshi

others

45 Points Joined May 2012

Hello,

How should one look at the taxability of the buy back option for IDFC infrastructure bonds Tranche1 issued in Dec. 2011?

I had invested Rs. 20,000/- and opted for cumulative buy back option. It got exercised after 5 years lock in in Dec. 2016 and I received a sum of Rs. 30,780/-

Que: Should I include Rs. 10,780 (interest income?) as income from other sources to be taxed as per my slab? OR it has to be considered as long term capital gains and taxed as per debt LTCG (20% with indexation)?