ITR Filling 2026: Bond Income, Capital Gains & TDS Reporting Explained

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Yes. ITR filing for AY 2026-27 opened in June 2026. It covers the money you earned between April 2025 and March 2026.

The revised ITR deadline for 2026 is 31 July 2026 for most individuals. The Union Budget 2026 did announce an August deadline, but that only kicks in from next year. For now, 31 July is the date.

If you miss the deadline, then these are the options that you have—

• Belated return: File by 31 December 2026. A small penalty applies under Section 234F.
• Revised return: Already filed but made a mistake? You can correct it up to 31 March 2027.

Which ITR Form Should Bond Investors Use?

Picking the wrong form is a common mistake. Here is a simple guide:

Your Situation	Form to Use
Only bond interest, no bonds sold, income below Rs 50 lakh	ITR-1
Bond interest plus sold bonds during the year	ITR-2
Bond income plus business income	ITR-3
Presumptive taxation plus bond interest	ITR-4

Bond investors who sold bonds at any point during the year must use ITR-2. It is the only form that has Schedule CG for capital gains. If you only collected coupon payments and sold nothing, then ITR-1 works.

When you are not sure, go with ITR-2. It covers everything. Filing with the wrong form means the department can treat your return as defective.

How to Disclose Bond Interest in Your ITR

Every rupee of coupon income you received from bonds during the year must be reported. ITR filing for this part is straightforward once you know where to look.

Bond interest goes under Income from Other Sources. The schedule to fill is Schedule OS.

Here is what to do:

1. Add up all the coupon payments you received from every bond between April 2025 and March 2026
2. Open Schedule OS in your ITR form
3. Enter the total amount
4. This gets added to your total income and taxed at your normal slab rate

The new tax regime is the default for ITR filing in 2026. Under this regime, you cannot claim any deduction on bond interest. The full amount is taxable. Bond investors using the old regime face the same result since no special deduction exists for coupon income there either.

Why no TDS does not mean no reporting

Bond investors holding listed bonds in a demat account do not have TDS cut from their coupon. Section 193 of the Income Tax Act exempts listed demat bonds from TDS. So the full coupon lands in your bank account with nothing taken out.

Many bond investors assume this means the income does not need to go in their ITR filing. That is incorrect. You must disclose bond interest in your ITR whether or not TDS was deducted. The government sees your coupon income in your Annual Information Statement. If it appears there but not in your return, you will receive an automated notice under Section 143(1)(a).

Cumulative bonds

Some bonds do not pay interest periodically. They add interest to the principal and pay everything at maturity. Bond investors holding these must still report the interest every year as it accrues, not just when they finally receive the lump sum. Waiting until maturity and reporting it all in one year will create a large and unexpected tax demand.

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How Profits from Selling Bonds Are Taxed

If you sold bonds before their maturity date, any profit is a capital gain. Bond investors report this in Schedule CG.

Type of Bond	Holding Period	Tax Rate
Listed bonds	Less than 12 months	Your normal slab rate
Listed bonds	More than 12 months	12.5%, no indexation
Unlisted bonds	Less than 36 months	Your normal slab rate
Unlisted bonds	More than 36 months	12.5%, no indexation

The indexation benefit was removed in Budget 2024 for bonds sold after 23 July 2024. For ITR filing in 2026, this covers all bonds sold during FY 2025-26. The 12.5% rate applies to all long-term bond gains this year with no indexation.

One genuine simplification in the new ITR forms: earlier, bond investors had to split their capital gains into two separate entries, gains before 23 July 2024 and gains after. That split has been removed for AY 2026-27. One entry, one rate. ITR filing is simpler this year for bond investors who sold bonds.

If you made a loss

A loss from selling bonds can be used to reduce your tax on other gains.

• Short-term losses reduce both short-term and long-term gains
• Long-term losses only reduce long-term gains
• Leftover losses carry forward for up to 8 years, but only if you file your ITR on time

Bond investors who file late lose the right to carry forward losses. This makes the 31 July deadline particularly important if you sold bonds at a loss this year.

TDS: What to Check Before You File

Before ITR filing, check your TDS records. Download Form 26AS and your Annual Information Statement (AIS) from the Income Tax portal. Compare both against your own records of coupons received.

Bond Type	TDS Rule
Listed bonds in demat	TDS at 10% (if interest exceeds Rs 10,000 per issuer per year)
Unlisted or physical bonds	TDS at 10% (if interest exceeds Rs 10,000 per issuer per year)
Government securities	No TDS
Tax-free bonds	No TDS

If TDS was deducted, claim the credit in Schedule TDS. TDS is just an advance payment, not the final tax. If your slab rate is higher than 10%, you pay the difference. If your total income is below the taxable limit, you can claim a refund.

If TDS in Form 26AS does not match what you actually received, contact the bond issuer and ask them to correct their TDS return before you file. A mismatch between your AIS and your ITR is one of the most common triggers for an automated notice.

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Tax-Free Bonds: Still Need to Report Them?

Yes. Many bond investors get this wrong.

Bonds issued by organizations like NHAI, REC, PFC, and IRFC pay interest that is completely tax-free under Section 10(15)(iv) of the Income Tax Act. This exemption applies under both the old and new tax regimes.

But bond investors must still report this income under Schedule EI, which stands for Exempt Income. Just because no tax is owed does not mean you skip the disclosure. The AIS records the coupon credits. If they appear in AIS but not in your ITR filing, the department will flag a mismatch even though the amount is non-taxable.

54EC bonds are different

Bond investors use 54EC bonds to save tax on capital gains from selling property. The property gain exemption goes in Schedule CG under Section 54EC. The interest from these bonds is taxable and goes in Schedule OS like any other coupon.

New Simplified Tax Forms for Bonds in AY 2026-27

The Central Board of Direct Taxes (CBDT) updated the ITR forms for this year. The simplified tax forms for bonds come with changes that make ITR filing easier in some areas and stricter in others.

What got simpler:

• The split capital gains entry for before and after 23 July 2024 is gone. One rate, one entry for the full year
• Schedule Assets and Liabilities threshold went up to Rs 1 crore. Bond investors with income below this no longer need to file it
• ITR-1 and ITR-4 now allow up to two house properties, reducing unnecessary upgrades to ITR-2

What got stricter:

• ITR-4 filers must now list bonds and other financial instruments as part of their investment disclosure
• Schedule CG requires the correct asset category for bond gains, not a generic field
• Section 80G donations now require the IFSC code and payment reference number

What stayed the same:

• Bond interest is taxed at slab rate under Income from Other Sources
• LTCG on listed bonds is 12.5% without indexation
• No TDS on listed demat bonds
• Exempt income from tax-free bonds must still be disclosed

The simplified tax forms for bonds have genuinely reduced the complexity of Schedule CG. But the simplified tax forms for bonds do not change what bond investors owe. The disclosure rules remain the same.

Getting Your ITR Filing Right as a Bond Investor

Everything in this guide comes down to one habit: report what your Annual Information Statement already shows. The tax department sees your bond income before you file, so your ITR only has to match it.

For a bond investor, that means four entries at most:

• Coupon interest goes in Schedule OS, taxed at your slab rate
• Profit from bonds you sold goes in Schedule CG, at 12.5% for long-term listed bonds
• Interest from tax-free bonds goes in Schedule EI, even though no tax is due
• Any TDS deducted goes in Schedule TDS, where you can claim it back

Get those four right, match them to your AIS, and file by 31 July. Miss the deadline and you keep the tax bill but lose the right to carry forward any losses, which is the one avoidable mistake that actually costs money.

One point is worth remembering beyond this year. If you hold a bond to maturity, only the interest is ever taxed. There is no capital gains tax on redemption, so a bond you never sell never touches Schedule CG. That makes buy-and-hold bond investing the simplest kind to file, only a coupon entry in Schedule OS, year after year. For most bond investors, the quietest portfolio is also the easiest one to report.

ITR Filling Frequently Asked Questions