Listed Bonds

Listed bonds are those that are traded on recognized stock exchanges. The tax treatment for capital gains arising from these bonds is as follows:

Long-Term Capital Gains (LTCG): If a listed bond is held for more than 12 months, any profit realized upon its sale is considered LTCG. The tax rate for LTCG on listed bonds is 12.5%.

Short-Term Capital Gains (STCG): If a listed bond is held for 12 months or less, the profit is classified as STCG. The tax on STCG is determined based on the individual’s applicable income tax slab rate. 

Unlisted Bonds and Debentures

Unlike listed bonds, unlisted bonds and debentures are not traded on stock exchanges. For these instruments, the tax treatment has undergone a significant change:

Capital Gains: All capital gains from unlisted bonds and debentures are considered short-term capital gains, regardless of the holding period. This means that the tax on these gains will be determined based on the individual’s applicable income tax slab rate.

TDS on Interest Earned on Government Securities

A 10% Tax Deducted at Source (TDS) will be applicable on interest earned from government securities, including Floating Rate Savings (Taxable) Bonds (FRSB) 2020 or any other notified security of the Central or State Governments if the annual interest income exceeds ₹10,000. This rule is effective since October 1, 2024.