{"id":13799,"date":"2026-06-02T04:03:00","date_gmt":"2026-06-02T04:03:00","guid":{"rendered":"https:\/\/goldenpi.com\/blog\/?p=13799"},"modified":"2026-09-09T18:44:15","modified_gmt":"2026-09-09T13:14:15","slug":"bond-taxation-in-india","status":"publish","type":"post","link":"https:\/\/goldenpi.com\/blog\/investment-guide\/bond-taxation-in-india\/","title":{"rendered":"Bond Taxation in India 2026: Interest, Capital Gains &#038; TDS Rules Explained"},"content":{"rendered":"<div class=\"gpi-custom-widget-box\" style=\"border-left-color: #0066cc; background-color: #f0f7ff;\">\n<div class=\"gpi-custom-widget-title\" style=\"color: #0066cc;\">\ud83d\udcdd Quick Summary:<\/div>\n<h2 class=\"gpi-custom-widget-h2-content\"><span class=\"ez-toc-section\" id=\"In_India_bond_interest_is_generally_added_to_your_total_income_and_taxed_at_your_applicable_income_tax_slab_rate_Capital_gains_on_listed_bonds_held_for_more_than_12_months_are_generally_taxed_at_125_as_long-term_capital_gains_LTCG_without_indexation_while_gains_on_bonds_held_for_12_months_or_less_are_generally_taxed_at_your_applicable_slab_rate_TDS_on_interest_is_generally_deducted_at_10_when_the_applicable_annual_interest_threshold_is_exceeded\"><\/span>In India, bond interest is generally added to your total income and taxed at your applicable income tax slab rate. Capital gains on listed bonds held for more than 12 months are generally taxed at <strong>12.5% as long-term capital gains (LTCG), without indexation<\/strong>, while gains on bonds held for 12 months or less are generally taxed at your applicable slab rate. <strong>TDS on interest is generally deducted at 10% when the applicable annual interest threshold is exceeded.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<\/div>\n\n\n<p>Bond interest is taxed at your income slab rate, listed long-term capital gains (held >12 months) are taxed at 12.5% without indexation, and unlisted bonds fall under slab rates. TDS applies at 10% on interest exceeding \u20b910,000 annually under Section 193 of the Income Tax Act, or 20% if no valid PAN is provided.<\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_79_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/goldenpi.com\/blog\/investment-guide\/bond-taxation-in-india\/#In_India_bond_interest_is_generally_added_to_your_total_income_and_taxed_at_your_applicable_income_tax_slab_rate_Capital_gains_on_listed_bonds_held_for_more_than_12_months_are_generally_taxed_at_125_as_long-term_capital_gains_LTCG_without_indexation_while_gains_on_bonds_held_for_12_months_or_less_are_generally_taxed_at_your_applicable_slab_rate_TDS_on_interest_is_generally_deducted_at_10_when_the_applicable_annual_interest_threshold_is_exceeded\" >In India, bond interest is generally added to your total income and taxed at your applicable income tax slab rate. Capital gains on listed bonds held for more than 12 months are generally taxed at 12.5% as long-term capital gains (LTCG), without indexation, while gains on bonds held for 12 months or less are generally taxed at your applicable slab rate. TDS on interest is generally deducted at 10% when the applicable annual interest threshold is exceeded.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/goldenpi.com\/blog\/investment-guide\/bond-taxation-in-india\/#How_is_Bond_Income_Taxed_in_India\" >How is Bond Income Taxed in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/goldenpi.com\/blog\/investment-guide\/bond-taxation-in-india\/#How_is_Interest_Income_From_Bonds_Taxed\" >How is Interest Income From Bonds Taxed?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/goldenpi.com\/blog\/investment-guide\/bond-taxation-in-india\/#What_is_TDS_on_Bonds_and_When_Does_it_Apply\" >What is TDS on Bonds, and When Does it Apply?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/goldenpi.com\/blog\/investment-guide\/bond-taxation-in-india\/#TDS_Tax_Deducted_at_Source_Rules_on_Bonds\" >TDS (Tax Deducted at Source) Rules on Bonds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/goldenpi.com\/blog\/investment-guide\/bond-taxation-in-india\/#Capital_Gains_on_Bonds_The_Listed_vs_Unlisted_Rules\" >Capital Gains on Bonds: The Listed vs. Unlisted Rules<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/goldenpi.com\/blog\/investment-guide\/bond-taxation-in-india\/#Special_Bond_Categories_and_How_They_are_Taxed\" >Special Bond Categories and How They are Taxed<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/goldenpi.com\/blog\/investment-guide\/bond-taxation-in-india\/#Frequently_Asked_Questions_Bond_Taxation_in_India\" >Frequently Asked Questions: Bond Taxation in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/goldenpi.com\/blog\/investment-guide\/bond-taxation-in-india\/#Disclaimer\" >Disclaimer<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<h3 class=\"wp-block-heading\">As of <strong>2026<\/strong>, the key LTCG\/STCG rates in India are<\/h3>\n\n\n\n<figure class=\"wp-block-table\"><div class=\"pcrstb-wrap\"><table class=\"has-fixed-layout\"><thead><tr><th>Investment \/ Asset<\/th><th>STCG<\/th><th>LTCG<\/th><\/tr><\/thead><tbody><tr><td><strong>Listed equity shares<\/strong> (STT applicable)<\/td><td><strong>20%<\/strong><\/td><td><strong>12.5%<\/strong> above \u20b91.25 lakh<\/td><\/tr><tr><td><strong>Equity-oriented mutual funds<\/strong><\/td><td><strong>20%<\/strong><\/td><td><strong>12.5%<\/strong> above \u20b91.25 lakh<\/td><\/tr><tr><td><strong>Business Trusts \/ REITs \/ InvITs<\/strong><\/td><td><strong>20%<\/strong> for specified STCG<\/td><td><strong>12.5%<\/strong> for specified LTCG<\/td><\/tr><tr><td><strong>Listed bonds \/ debentures<\/strong><\/td><td><strong>Applicable slab rate<\/strong><\/td><td><strong>12.5%<\/strong><\/td><\/tr><tr><td><strong>Unlisted bonds \/ debentures<\/strong><\/td><td><strong>Applicable slab rate<\/strong><\/td><td><strong>12.5%<\/strong><\/td><\/tr><tr><td><strong>Gold \/ Gold ETFs<\/strong><\/td><td>Generally slab rate if short-term<\/td><td><strong>12.5%<\/strong> if long-term<\/td><\/tr><tr><td><strong>Debt mutual funds purchased on\/after 1 Apr 2023<\/strong><\/td><td><strong>Slab rate<\/strong><\/td><td><strong>Slab rate<\/strong><\/td><\/tr><tr><td><strong>Digital Gold \/ Physical Gold<\/strong><\/td><td>Slab rate<\/td><td><strong>12.5%<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n<p>The <strong>12.5% LTCG rate without indexation<\/strong> was introduced from <strong>23 July 2024<\/strong> and remains the relevant general LTCG rate in 2026.<\/p>\n\n\n\n<p>Listed bonds held for more than 12 months are generally taxed at 12.5% LTCG without indexation, while gains on bonds held for 12 months or less are generally taxed at the applicable slab rate.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Held for 12 months or less:<\/strong> STCG is generally taxed at your <strong>applicable income-tax slab rate<\/strong>.<\/li>\n\n\n\n<li><strong>Held for more than 12 months:<\/strong> LTCG \u2192 <strong>12.5% without indexation<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_is_Bond_Income_Taxed_in_India\"><\/span><strong>How is Bond Income Taxed in India?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Before getting into the rules, it helps to keep in mind that the Income Tax Act treats bond income in two different ways.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Interest income: Every coupon payment you receive is treated as \u201cIncome from Other Sources\u201d and taxed at your income slab rate. No special rate. No concessions. Just your slab.<\/li>\n\n\n\n<li>Capital gains: If you sell a bond at a profit, the profit is a capital gain. The taxation depends on how long you hold the bond and whether it is listed on a stock exchange or not.<\/li>\n<\/ol>\n\n\n\n<p>Everything else in bond taxation sits between these two brackets. Staying mindful of this as we proceed will help.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_is_Interest_Income_From_Bonds_Taxed\"><\/span><strong>How is Interest Income From Bonds Taxed?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every time a bond pays you a coupon, the amount is added to your total annual income and taxed at your applicable slab rate depending on your total income.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Let\u2019s establish this with an example:<\/h3>\n\n\n\n<p>Say you hold bonds worth \u20b910 lakh at an 8% annual coupon rate. That\u2019s \u20b980,000 in annual interest income. If you fall in the 20% tax bracket, \u20b916,000 of that is added straight to your tax. Your effective <a href=\"https:\/\/goldenpi.com\/collections\/tax-free-bonds\">post-tax yield<\/a> trickles down from 8% to 6.4%<\/p>\n\n\n\n<p>That difference might seem small, but in the long term, it makes a big dent in your returns.<\/p>\n\n\n\n<p>One thing that catches investors off-guard is cumulative bonds. These are bonds that pay your coupons as a lump sum at maturity instead of periodically. Investors might assume that they\u2019ll be taxed when they receive the payment, but that\u2019s not how it works. Under Indian tax law, interest on cumulative bonds is taxed on an accrual basis, which means you just add the interest for that year to your total income and get it taxed according to your slab, even if you haven\u2019t seen a single rupee of it yet.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_TDS_on_Bonds_and_When_Does_it_Apply\"><\/span><strong>What is TDS on Bonds, and When Does it Apply?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Tax Deducted at Source, or TDS, is an advance tax deduction. The bond issuer will subtract it from the interest credited to your account, and you can avail yourself of it as a deduction in your final tax liability while filing your ITR.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Here\u2019s how it works for bonds:<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The TDS is deducted at 10% under section 193 of the Income Tax Act if the interest earned is more than \u20b910,000 in a financial year.&nbsp;<\/li>\n\n\n\n<li>20% TDS applies if you haven\u2019t provided a valid PAN to the issuer.<\/li>\n\n\n\n<li>Government securities (G-Secs) are generally exempt from TDS on interest for resident investors, but the income is still taxed at your slab rate.<\/li>\n\n\n\n<li>Form 121 (replacing earlier forms 15G and 15H) can be submitted to the issuer if your total income falls below the taxable threshold. This prevents TDS deduction, so you don\u2019t have to wait for a refund.<\/li>\n<\/ul>\n\n\n\n<p>Always verify TDS deducted against your bonds in Form 26AS before filing your ITR.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"TDS_Tax_Deducted_at_Source_Rules_on_Bonds\"><\/span>TDS (Tax Deducted at Source) Rules on Bonds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Standard Rate:<\/strong> Under Section 193, TDS is deducted at <strong>10%<\/strong> on interest payouts if the total interest earned exceeds \u20b910,000 in a single financial year. <\/li>\n\n\n\n<li><strong>PAN Penalty:<\/strong> If you fail to provide a valid PAN to the issuer or registrar, the TDS rate increases to <strong>20%<\/strong>. <\/li>\n\n\n\n<li><strong>TDS Avoidance:<\/strong> If your total taxable income is below the minimum exemption limit, you can submit <strong>Form 15G<\/strong> (for individuals under 60) or <strong>Form 15H<\/strong> (for senior citizens) to prevent TDS deduction upfront. <\/li>\n\n\n\n<li><strong>Verification:<\/strong> Always verify that the deducted TDS appears in your <strong><a href=\"https:\/\/www.incometax.gov.in\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Income Tax e-Filing Portal<\/a><\/strong><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Recent Post:<\/h3>\n\n\n<ul class=\"wp-block-latest-posts__list is-grid columns-3 wp-block-latest-posts\"><li><div class=\"wp-block-latest-posts__featured-image aligncenter\"><a href=\"https:\/\/goldenpi.com\/blog\/bond-news\/dsra-and-escrow-accounts-how-ncd-issuers-protect-your-coupons\/\" aria-label=\"Understanding DSRA and Escrow Accounts: How NCD Issuers Protect Your Coupons\"><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10183123\/Understanding-DSRA-and-Escrow-Accounts-1024x576.jpg\" class=\"attachment-large size-large wp-post-image\" alt=\"Understanding DSRA and Escrow Accounts\" style=\"\" srcset=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10183123\/Understanding-DSRA-and-Escrow-Accounts-1024x576.jpg 1024w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10183123\/Understanding-DSRA-and-Escrow-Accounts-300x169.jpg 300w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10183123\/Understanding-DSRA-and-Escrow-Accounts-768x432.jpg 768w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10183123\/Understanding-DSRA-and-Escrow-Accounts-1536x864.jpg 1536w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10183123\/Understanding-DSRA-and-Escrow-Accounts.jpg 1600w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/div><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/dsra-and-escrow-accounts-how-ncd-issuers-protect-your-coupons\/\">Understanding DSRA and Escrow Accounts: How NCD Issuers Protect Your Coupons<\/a><\/li>\n<li><div class=\"wp-block-latest-posts__featured-image aligncenter\"><a href=\"https:\/\/goldenpi.com\/blog\/bond-news\/how-to-read-a-bond-credit-rating-rationale-report\/\" aria-label=\"How to Read a Bond Credit Rating Rationale Report: A Guide for Investors\"><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10175637\/Read-Bond-Credit-Rating-Rationale-Report-1024x576.jpg\" class=\"attachment-large size-large wp-post-image\" alt=\"Read Bond Credit Rating Rationale Report\" style=\"\" srcset=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10175637\/Read-Bond-Credit-Rating-Rationale-Report-1024x576.jpg 1024w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10175637\/Read-Bond-Credit-Rating-Rationale-Report-300x169.jpg 300w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10175637\/Read-Bond-Credit-Rating-Rationale-Report-768x432.jpg 768w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10175637\/Read-Bond-Credit-Rating-Rationale-Report-1536x864.jpg 1536w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/10175637\/Read-Bond-Credit-Rating-Rationale-Report.jpg 1600w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/div><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/how-to-read-a-bond-credit-rating-rationale-report\/\">How to Read a Bond Credit Rating Rationale Report: A Guide for Investors<\/a><\/li>\n<li><div class=\"wp-block-latest-posts__featured-image aligncenter\"><a href=\"https:\/\/goldenpi.com\/blog\/bond-news\/fcnr-deposits-vs-corporate-ncds\/\" aria-label=\"FCNR Deposits vs. Corporate NCDs: Where Should NRIs Invest Surplus Cash in 2026?\"><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/09163649\/FCNR-Deposits-vs-Corporate-NCDs-1024x576.jpg\" class=\"attachment-large size-large wp-post-image\" alt=\"FCNR Deposits vs Corporate NCDs\" style=\"\" srcset=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/09163649\/FCNR-Deposits-vs-Corporate-NCDs-1024x576.jpg 1024w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/09163649\/FCNR-Deposits-vs-Corporate-NCDs-300x169.jpg 300w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/09163649\/FCNR-Deposits-vs-Corporate-NCDs-768x432.jpg 768w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/09163649\/FCNR-Deposits-vs-Corporate-NCDs-1536x864.jpg 1536w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/09\/09163649\/FCNR-Deposits-vs-Corporate-NCDs.jpg 1600w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/div><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/fcnr-deposits-vs-corporate-ncds\/\">FCNR Deposits vs. Corporate NCDs: Where Should NRIs Invest Surplus Cash in 2026?<\/a><\/li>\n<\/ul>\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Capital_Gains_on_Bonds_The_Listed_vs_Unlisted_Rules\"><\/span><strong>Capital Gains on Bonds: The Listed vs. Unlisted Rules<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This is where <a href=\"https:\/\/goldenpi.com\/blog\/essentials\/how-are-bonds-taxed\/\">bond taxation<\/a> gets its most important, and most misunderstood, distinction.<\/p>\n\n\n\n<p>When you sell a bond at a profit before maturity, the gain is a capital gain. Whether it\u2019s taxed as short-term or long-term further depends on two things: how long you hold the bond and whether it\u2019s listed on a recognized stock exchange like BSE or NSE.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><div class=\"pcrstb-wrap\"><table class=\"has-fixed-layout\"><tbody><tr><td>Bond type<\/td><td>Holding period<\/td><td>Tax treatment<\/td><\/tr><tr><td>Listed bonds<\/td><td>More than 12 months<\/td><td>LTCG at flat 12.5% (no indexation)<\/td><\/tr><tr><td>Listed bonds<\/td><td>12 months or less<\/td><td>STCG at slab rate<\/td><\/tr><tr><td>Unlisted bonds\/debentures<\/td><td>Any holding period<\/td><td>STCG at slab rate<\/td><\/tr><tr><td>Tax-free bonds (sold before maturity)<\/td><td>More than 12 months<\/td><td>LTCG at 12.5%<\/td><\/tr><tr><td>Tax-free bonds (sold before maturity)<\/td><td>12 months or less<\/td><td>STCG at slab rate<\/td><\/tr><tr><td>Sovereign Gold Bonds (held to maturity)<\/td><td>Full tenure<\/td><td>Capital gains (fully exempt)<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n<p>Two important announcements that investors are yet to adjust their portfolios to: unlisted bonds are now always treated as STCG, irrespective of holding period, and the indexation benefit has been removed from all categories of bonds. Both changes have a profound impact on <a href=\"https:\/\/goldenpi.com\/blog\/bond-news\/market-linked-debentures\/\">post-tax returns for debt investors.<\/a>&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Special_Bond_Categories_and_How_They_are_Taxed\"><\/span><strong>Special Bond Categories and How They are Taxed<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Tax-free bonds (NHAI, REC, PFC): Interest is fully exempt under Section 10(15). But selling before maturity triggers normal capital gains tax.<\/li>\n\n\n\n<li>54EC bonds: Used to save capital gains tax on property sales. Invest up to \u20b950 lakh within six months of the sale, lock in for five years, and the property gain is exempt.<\/li>\n\n\n\n<li>Zero coupon bonds: No interest payments are made during the life of a bond, so the gain at maturity is a capital gain. If the bond is listed and has been held for more than 12 months, then LTCG is applicable at the rate of 12.5%.&nbsp;<\/li>\n\n\n\n<li>Sovereign Gold Bonds: All interest earned on the bond is taxable as per the tax slab rates, while all capital gains on redemption on maturity are fully exempt.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions_Bond_Taxation_in_India\"><\/span><strong>Frequently Asked Questions: Bond Taxation in India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1780314733289\"><strong class=\"schema-faq-question\">Q1. <strong>Can I claim a refund if excess TDS was deducted on my bond interest?<\/strong><\/strong> <p class=\"schema-faq-answer\">A: Yes. TDS is credited to the total tax liability at the time of filing of ITRs. Where more has been deducted than is actually due\u2014since the person&#8217;s income is in a lower slab or is under the taxable threshold\u2014the extra is returned to the bank account of the taxpayer directly by the Income Tax Department. This can only be done by filing an ITR on time.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1780314757664\"><strong class=\"schema-faq-question\">Q2. <strong>Are bonds better than FDs from a tax perspective?\u00a0<\/strong><\/strong> <p class=\"schema-faq-answer\">A: Interest from both is taxed at your slab rate. No difference there. Bonds have an <a href=\"https:\/\/goldenpi.com\/blog\/investment-guide\/capital-gains-vs-interest-income-whats-more-tax-friendly\/\" type=\"post\" id=\"11607\">advantage on capital gains<\/a>; the tax charged on the sale of a listed bond after 12 months is LTCG at 12.5%, whereas the slab rate tax applicable on the FD interest has no such advantage. If you are an investor who falls in this range and are comfortable with the secondary market, listed bonds may be tax-efficient as compared to FDs.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1780314780972\"><strong class=\"schema-faq-question\">Q3. <strong>How does bond taxation work under the new vs. old tax regime?<\/strong>\u00a0<\/strong> <p class=\"schema-faq-answer\">A: The rates remain unchanged\u2014slab rate of interest on bonds, 12.5% LTCG on listed bonds, irrespective of the regime. What changes your taxable income? With the old regime, the base income from bond interest, on which the deduction is calculated, is reduced. In the new regime, the deductions have been eliminated, and the same interest income is taxed under a higher slab. The bigger your bond interest income, the more important the regime choice becomes.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1780314794185\"><strong class=\"schema-faq-question\">Q4. <strong>Which ITR form should I use for bond income?<\/strong>\u00a0<\/strong> <p class=\"schema-faq-answer\">A: No capital gains \u2013 ITR-1 will be fine if the income is only salary and bond interest. Any capital gains from selling bonds \u2013 ITR-2. Business or professional income alongside bond income \u2013 ITR-3. When in doubt, file one step up, because if you file the wrong form, it will mean a defective return notice.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1788959496349\"><strong class=\"schema-faq-question\"><strong>Q5. Is TDS applicable on interest earned from bonds?<\/strong><\/strong> <p class=\"schema-faq-answer\">A: Yes, TDS may apply to taxable bond interest when the applicable threshold is exceeded. The rate is generally <strong>10%<\/strong>, subject to the type of bond, issuer, and applicable tax rules. TDS is only a tax credit and does not necessarily represent your final tax liability. The amount deducted can be claimed as credit while filing your ITR.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1788959507508\"><strong class=\"schema-faq-question\"><strong>Q6. Are capital gains on bonds taxed differently from bond interest?<\/strong><\/strong> <p class=\"schema-faq-answer\">A: Yes. <strong>Bond interest is generally taxed as income from other sources at your applicable slab rate<\/strong>, whereas capital gains arise when you sell or redeem a bond for a profit. For listed bonds held for more than 12 months, the gain is generally treated as LTCG and taxed at <strong>12.5% without indexation<\/strong>. Gains on listed bonds held for 12 months or less are generally taxed at the applicable slab rate.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1788959520132\"><strong class=\"schema-faq-question\"><strong>Q7. Is tax applicable if I hold a bond until maturity?<\/strong><\/strong> <p class=\"schema-faq-answer\">A: Yes, the <strong>interest or coupon income<\/strong> earned during the holding period is generally taxable at your applicable slab rate. If the bond is redeemed at maturity at its original issue or purchase price, there may be no capital gain. However, if you purchased the bond at a price different from its redemption value, a capital gain or loss may arise depending on the circumstances and applicable tax rules<\/p> <\/div> <\/div>\n\n\n<div class=\"gpi-custom-widget-box\" style=\"border-left-color: #0066cc; background-color: #f0f7ff;\">\n<div class=\"gpi-custom-widget-title\" style=\"color: #0066cc;\">Ready to Invest?<\/div>\n<div class=\"gpi-custom-widget-content\">\n<p>Visit <a href=\"https:\/\/goldenpi.com\/\">GoldenPi<\/a> to explore current bond options. Compare yields, ratings, and tenures in one place and invest online with as little as \u20b930,000.<\/p>\n<\/div>\n<\/div>\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Disclaimer\"><\/span>Disclaimer<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Fixed returns do not constitute guaranteed or assured returns. Investments in corporate debt securities and municipal debt securities\/securitized debt instruments are subject to credit risks, market risks, and default risks, including delay and\/or default in payment. Read all the offer-related documents carefully. This blog\/article should not be construed as financial advice or as an offer or recommendation to buy or sell any security or any products\/services of\/on GoldenPi or any product\/services of its third-party client(s). For a detailed calculation of YTM, visit our website.&nbsp;<a href=\"https:\/\/delivery.goldenpi.com\/XPRBSN?id=162365=ch0GCFVXBVBUH1QDUlZXUlgBVgNSUwJVWgQGDFJQAVsEUwRfBldSBFVUAglRBFJSAA0ZBgxfQFBbERxBFSNTV10FU1cTDBgFDg5OAFIKVVFQBlZTVwQBBgFSAg0aC0BMQRIMFkwBUwoIFVdDHBwCCw1QAAsTWBpSVwgebDYxdmt\/Xl9dHxMF&amp;fl=WRVCSRBfGUkETltfVwNLAxVbCQwNWhpYVkpFGwMOBRcEWQMNUEoHSQJaV1BQAQQHTAZXA1IcAAMOBBxWB1IMFQUEVQxXXAEFBVQEUkpTVlMCUFEHU1JVAwhUAFECAQZaVFEADVAAVQBXVFRUUw==\" target=\"_blank\" rel=\"noreferrer noopener\">T&amp;C\u2019s Apply<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\ud83d\udcdd Quick Summary: In India, bond interest is generally added to your total income and taxed at your applicable income tax slab&hellip;<\/p>\n","protected":false},"author":15,"featured_media":13802,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[26],"tags":[],"class_list":["post-13799","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investment-guide"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How Bonds Are Taxed in Sep 2026 India: The Complete Guide<\/title>\n<meta name=\"description\" content=\"Understand how bonds are taxed in India in 2026. 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