Navigating Taxation: Bonds & Debentures

Understanding Bonds & Debentures: Bonds: Issued by governments or corporations, offer fixed income and safety. Debentures: Corporate instruments lacking specific asset collateral. Types: Bonds: Taxable, tax-free, zero coupon, etc. Debentures: Secured/unsecured, convertible/non-convertible, etc. Taxation on Capital Gains: Short-term (<12 months) & long-term (≥12 months) gains taxed at different rates. Indexed cost calculation applicable for LTCG on listed securities.

Income from Other Sources (IFOS): Interest income taxed at slab rates. Interest from tax-free bonds exempted from tax. Tax Rates on Sale: Listed: STCG at slab rates; LTCG at 10% without indexation. Unlisted: STCG at slab rates; LTCG at 20% without indexation. Reporting in ITR: Use ITR-2 for reporting capital gains. Schedule CG: Detail sales consideration, acquisition cost, gains/losses.

Carry Forward Loss: Short-term losses can offset both STCG & LTCG; remaining can be carried forward. Long-term losses can offset LTCG; excess can be carried forward. Illustrative Scenario - Mr. Rahul's Tax Calculation: Income Details: Salary: INR 8,70,000 Short-term Capital Loss: INR 30,000 Long-term Capital Gain: INR 1,50,000

Tax Liability: Set off STCL against LTCG & STCG. Remaining loss carried forward. LTCG taxed at 10% without indexation. Total Tax Liability: INR 1,02,440. By navigating these taxation principles, investors can effectively manage their tax liabilities on investments in bonds and debentures.