Tds on goi bonds - non cumulative option

Respected Sir,

I am planning to invest on GoI 8% bonds. Wanted to understand tax implication if i choose cumulative option. In one of the website the saw thes statement " In case of 8% Saving Bonds tax will be deducted at source while making payment of interest on the non-cumulative bonds from time to time and credited to Government Account. Tax on interest portion of the maturity value will be deducted at source at the time of payment of the maturity proceeds on the cumulative bonds and credited to Government Account."

As per the above statment Tax will be deducted at the time of payment of the maturity proceeds, which means tax will be deducted only after 6 years, unlike in FD where tax is deducted every year though we choose cumulative option. Please provide clarity on this aspect.

Regards,

Divakar

The deduction of TDS on interest for both cumulative and non-cumulative schemes differ as:

In case of 8% Saving Bonds tax will be deducted at source while making payment of interest on the non-cumulative bonds from time to time and credited to Government Account.

Tax on interest portion of the maturity value will be deducted at source at the time of payment of the maturity proceeds on the cumulative bonds and credited to Government Account."

So, if you invest in non-cumulative bonds........ interest will be paid after deduction of TDS... which is similar to Bank FD.

But if you invest in cumulative bonds.......... the gain which you receive on maturity will be paid after deduction of TDS...... and will be treated as LTCG.