Taxation on interest at the time of allotment of bonds

since intt is on tax free bonds, therefore intt should also be tax free.

After allotment, for sure, it must be taxfree? But some part of application money is refunded as bonds are partially alloted. So money corresponding to unalloted bonds along with interest is given back to applicant. Now this interest is in two parts, One part is interest received on application amount for which bonds has not been given, it is at a lower rate of 5% and other part is interest on allotment amount ( for which bonds has been alloted) is at the coupon rate.