How is the profit on my bond sale taxed?
Live MintIn accordance with Section 56 of the Income Tax Act, income in the nature of interest is subject to taxation under the head ‘Income from other sources.’ This encompasses all types of interest, including those from bank accounts, fixed deposits and debentures, whether convertible or non-convertible. However, taxpayers possess the flexibility to declare this income for taxation either on an accrual basis—when the interest income becomes due—or on a receipt basis—when the interest is received in their bank account. The second suggests that the excess amount over the face value represents expenses incurred for earning the interest income and therefore can be claimed as a deduction. Note that TDS should not be deducted from the taxable income; instead, credit should be claimed against the income tax payable and the amount becomes refundable to the taxpayer if no income tax is payable.
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