Bonds are redeemed Registered bondholders relinquish their legally discharged bond certificates (by signing on the reverse of the bonds with a Revenue Stamp of Re. 1/-) on the date of maturity. The redemption record date is one month before the deemed encashment / redemption date.
After infrastructure bonds mature, what happens to them?
As a result, the tax-advantaged long-term infrastructure bonds were not really tax-free bonds.
The annual interest payout option and the cumulative interest option were both available to the investors.
While investors who chose annual interest distributions have already paid tax on the amount of interest received, those who chose the cumulative option would pay more tax in the year of investment than they saved in the year of investment.
Confusion over Tax-Saving vs. Tax-Paying Infrastructure Bonds
Taxpayers who take advantage of free bonds end up paying more in taxes than they receive in benefits.
Taxation
Because the interest on long-term infrastructure bonds is taxable, the interest earned by the investors annually for those who chose the annual option and aggregate on maturity for those who chose the cumulative option will be added to their taxable income.
As a result, tax payable will be lower for investors in lower tax bands and higher for those in higher tax brackets.
TDS
For Resident taxpayers who choose the cumulative option in physical format, the interest payment will be subject to a 10% Tax Deducted at Source (TDS) if the interest payment upon redemption exceeds Rs 5,000.
The TDS rate will increase to 20% if the bondholder does not have a valid PAN or if the investor has not submitted his tax returns for the last two years and the total TDS and TCS in each of those years is Rs 50,000 or higher.
TDS of 31.2 percent would be applied to interest payouts for non-resident taxpayers.
How to save TDS
Resident bondholders must submit Form 15G / 15H, as appropriate, to avoid TDS. Those who did not disclose their PAN data at the time of investment must update their PANs with the various RTAs within the time frames set by the bond issuers.
Non-Resident bondholders must submit a tax officer’s order under Section 197 / 195 setting NIL / lower TDS rates to the appropriate RTAs before the deadline to guarantee that TDS is collected at the rates provided in the order.
When a bond reaches maturity, how do you redeem it?
Your link has finally matured after three decades of waiting. If you wish to cash in your bonds, you must follow specific requirements depending on the type of bond you have (paper or electronic).
- You can cash electronic savings bonds on the TreasuryDirect website, and you’ll get your money in two days.
- Most major financial institutions, such as your local bank, accept paper savings bonds.
If you can’t find your fully matured paper savings bond, you can have it electronically replaced by going to the TreasuryDirect website and filling out the necessary papers.
You’ll need the serial number of the bond, which serves as a unique identity. If this isn’t accessible, you’ll need other information, such as the exact month and year the bond was purchased, the owner’s Social Security number, and the names and addresses of the bond’s owners. Even if you’ve misplaced the bond, it’s possible to find it with a few efforts.
You can keep your bond after it matures, but you will not get any extra interest. On the one hand, because you can’t spend a savings bond without redeeming it, the value of your bonds is considered “secure.” On the other side, if your bond isn’t redeemed, you’ll miss out on additional sources of interest. With current inflation rates, it doesn’t make much sense to hold a bond that pays nothing and is losing money to inflation every day.
Finally, regardless of whether you redeem your bonds or not, you will owe taxes on them when they mature. In the year of maturity, make sure to include all earned and previously unreported interest on your tax return. If you don’t, you may be subject to a tax penalty for underpayment.
Who is the IDFC infrastructure bonds registrar?
Investors have received their allotment advice / bond certificate(s) for all IDFC FIRST Bank Infra bond issuance.
If you have not received your allocation advice/bond certificate, please write to the Registrar, i.eKFin Technologies Pvt. Ltd. (as per Format-V below).
For Bond Certificates: Based on your letter (Format V above), the Registrar (KFin Technology) will check on bond certificate postal returns at their end and, if discovered, verifies signatures and PAN details as provided in your letter and resend the Certificate to you.
If the Registrar cannot locate the document, you must follow the steps outlined in Serial No. 10 (Your Question) below.
For Allotment Advise: We will offer an allotment advice when we have thoroughly verified your details as submitted by you in Format V with the data we have on file.
Is the interest on IDFC infrastructure bonds tax deductible?
The interest on these bonds is not tax deductible. The interest earned by the investor is subject to taxation. The interest on these bonds is classified as income from other sources and is included in the assessee’s total income for the financial year in which it is received.
How can I purchase infrastructure bonds in 2021?
If you have a demat account, you can apply to invest in an infrastructure bond online. You must complete an online application form.
These relationships can be applied for in a physical form. You’ll need a PAN card that has been self-attested. As part of the KYC (Know Your Customer) procedure, you must provide proof of identity and address.
After the lock-in period has expired, these bonds can be exchanged on stock exchanges like stocks.
How do you account for revenue from infrastructure bonds?
Koushis received a tax credit of Rs 2,000 (without cess) in AY 2011-12 since he was in the 10% tax bracket.
The interest was paid on a regular basis and just the capital invested was refunded at maturity under the non-cumulative option, whereas the cumulative option increased the value of each IDFC Bond from Rs 5,000 to Rs 10,800 at maturity.
As a result, the entire maturity value of his Rs 20,000 investment should be Rs 43,200, with a net gain of Rs 23,200. However, Koushis was taken aback when a tax of 7.5 percent, or Rs 1,740, was deducted at source (TDS) before the maturity value was transferred to his bank account.
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Koushis now wonders if he needs to pay 22.5 percent more (excluding cess) on the Rs 23,200 gain now that he is in the 30% tax band.
“In the hands of the investor, interest earned on Long-Term Infrastructure Bonds would be taxable under the heading ‘Income from Other Sources.'” “The interest on such bonds is not eligible for the deduction under section 80CCF of the Income Tax Act, 1961,” said Dr. Suresh Surana, founder of RSM India.
“It’s crucial to understand the distinction between tax-saving bonds and tax-free bonds in this context. Tax-free bonds are those in which the interest component is exempt from taxes or tax-free, whereas tax-saving bonds are those in which the principle component is deducted by the investor when calculating his taxable income. As a result, the interest on the Infrastructure bonds in question, which are tax-free bonds, would be taxed,” he explained.
On maturity, it will result in a total tax burden of Rs 6,960 (excluding cess), whereas he received a tax advantage of Rs 2,000 by investing in tax-saving long-term infrastructure bonds.
“There would be no direct tax advantage accruing to the investor on account of rising from a 10% to a 30% tax band over ten years,” Dr. Surana stated of the benefit.
However, under the non-cumulative option, Koushis’ tax burden would have been lower because the interest payments were consistent as he progressed from the 10% to the 30% tax rate.
He now regrets choosing the cumulative option due to the misunderstanding that tax-saving bonds and tax-free bonds are the same thing.
Not only Koushis, but the ambiguity surrounding tax-saving and tax-free bonds has surprised many taxpayers who have reaped tax benefits by investing in Long-Term Infrastructure Bonds issued by IDFC, REC, IIFCL, and others and have subsequently moved to a higher tax bracket over the 10-year investment period, as the tax payout on maturity value under the cumulative option exceeds the tax benefit reaped on the investment amount.