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What are the taxation rules for state government bonds?


State government bonds are subject to taxation rules in India. The interest earned on these bonds is considered as income and is subject to tax as per the investor's income tax bracket. The interest earned on state government bonds is taxable under the head 'income from other sources' and the tax is deducted at source (TDS) by the issuer. However, in some cases, investors may be eligible for tax deductions under certain circumstances.