The ever-changing financial landscape necessitates the continuous updating of financial regulations. Therefore, the Union Budget 2023 has introduced a notable modification that impacts investors involved in listed debt securities. From April onwards, Tax Deduction at Source (TDS) will be applicable to interest income earned from listed bonds. This move is aimed at increasing transparency, streamlining tax collection and ensuring that individuals and institutions fulfill their tax obligations. Let’s dive deeper into the details and explore how this change will impact investors.
Listed bonds will now fall under the purview of TDS. This means that any individual or institution earning interest income from listed bonds will have tax deducted at source by the issuer at the time of payment. The inclusion of listed bonds under the TDS mechanism is primarily driven by the goal of enhancing tax compliance and simplifying the tax collection process. Additionally, this move brings transparency to the system, as the tax deducted will be reflected in the Form 26AS statement of the taxpayer.
For those investing in listed bonds, the introduction of TDS will have implications as the expected cashflow and returns from such investments change. It is important for investors to consider the TDS deduction while calculating their expected returns. However, there can be some respite for individuals and HUF from this TDS deduction on listed bonds, if they were to fill 15G and 15H forms.
Form 15G (for those below 60 years of age) and Form 15H (for above 60 years) provide a means for individuals to claim TDS relief on their interest income. Form 15G and Form 15H are considered self-declaration forms rather than certificates. It is advisable to complete either Form 15G or Form 15H at the beginning of the financial year to prevent TDS on interest income. In the case of holding corporate bonds, TDS is deducted if the interest income exceeds Rs 5,000. To avoid this deduction, you can submit either Form 15G or Form 15H to the issuer, requesting non-deduction of TDS. It is important to note that the TDS provision applies only to bonds issued by companies. Government bonds, including sovereign gold bonds, are exempt from the TDS requirement.
| Conditions | Form 15G | Form 15H |
| Requirements | Requirements | |
| 1. Eligible Entities | Individual or Hindu Undivided Family (HUF) | Individual |
| 2. Residential Status | Indian | Indian |
| 3. Age Limit | Less than 60 years | Aged 60 years or will turn 60 during the relevant financial year |
| 4. Tax Liability | Tax calculated on income should be NIL | Tax calculated on income should be NIL |
| 5. Total Income | Total income for the year must be below the basic exemption limit of that year which is Rs.2.5 lakh | For individuals aged 60-80 years, the taxable annual income must be at least 3 lakhs. |
The inclusion of listed bonds under TDS is expected to bring several benefits to the financial ecosystem. It will encourage tax compliance by ensuring that individuals and institutions accurately report their interest income. This move will significantly expand the taxpayer base and increase tax revenues for the government.
Form 15G and Form 15H are valuable tools for individuals seeking TDS relief on their interest income from bonds. By understanding their features, purpose, submission timelines and designated submission points, taxpayers can effectively navigate the process and optimize their savings. It is recommended to consult a tax professional or refer to the official guidelines for specific instructions pertaining to individual cases.
By introducing TDS on interest income from listed bonds, the government has taken a significant step towards strengthening tax compliance and revenue collection. This move aims to bring transparency, enhance tax compliance and streamline tax recovery processes. It is crucial for individuals and institutions investing in listed bonds to understand the implications of this change and incorporate it into their financial planning. Ultimately, this step will contribute to the overall growth and development of the financial ecosystem, fostering a more robust and accountable economy. As investors, let’s stay informed and adapt to these changes, ensuring that we fulfill our tax responsibilities while making informed financial decisions.
A. No, NRIs (Non-Resident Indians) are not eligible to submit Form 15G or Form 15H. These forms are specifically meant for resident individuals and Hindu Undivided Families (HUF) in India. NRIs are not eligible for the benefits provided by these forms.
A. To submit these forms, you need to connect with the respective registrar of the issue.
Disclaimer: Investments in debt securities/ municipal debt securities/ securitised debt instruments are subject to risks including delay and/ or default in payment. Read all the offer related documents carefully.
