States, counties, towns, and other government entities issue Munis to fund significant capital projects such as the construction of schools, hospitals, roadways, and other public structures.
Municipal bond interest is normally exempt from federal income taxes. If your home state or city issues the bond, it may also be free from state or municipal income taxes. Interest earned on muni bonds issued by a different state or city is taxable on your state or local income tax return.
The term “triple tax exempt” refers to municipal bonds that are exempt from federal, state, and local taxes.
Savings bonds, US Treasuries, and Treasury bonds issued by the US Department of the Treasury are all tax-exempt to some extent. You owe federal income tax on them if you own them. They are, however, usually exempt from state and municipal income taxes.
Is TDS deducted from REC bond interest?
10,000 in REC and NHAI bonds, respectively. These bonds have a 5-year lock-in period (starting in April 2018) and are non-transferable. The interest rate on both REC and NHAI bonds is 5.75 percent per year, payable annually. The interest earned on 54EC bonds is taxable, however there is no TDS deducted. The risk of interest and capital payment is protected because 54EC bonds are AAA rated and supported by the government.
Is it possible to redeem REC bonds before they expire?
What happens if I redeem the REC/NHAI bonds before the three-year period has expired? Yes, as long as you put the money into REC/three-year NHAI’s bonds.
What are tax-free REC bonds?
A few years ago, government-owned enterprises began issuing tax-free bonds, which pay an annual interest rate while providing tax-free revenue. This means that the interest earned is tax-free in the investor’s hands.
What interest income is exempt from taxation?
that specifies the exact amount of bank interest you got for your tax return Technically, there is no minimum amount of income that must be reported; nevertheless, any interest you earn must be disclosed on your tax return. Even if you don’t get a Form 1099-INT, you must declare all interest on your taxes. Because it may affect your tax return, any amount of tax-exempt interest must be disclosed on your income tax return.
Is the amount of bond maturity taxable?
The interest generated on tax-free bonds is not taxed, but the price appreciation of the bonds during their maturity (or sale) is treated as capital appreciation. As a result, capital gains taxes apply. Depending on the holding term, either the LTCG or the STCG will apply.
Is interest earned on government bonds taxable?
Interest earned on government bonds is taxed in the same way as interest earned on bank fixed deposits is taxed. That is, depending on the tax system you have chosen, the interest you receive will be taxed at the income tax rate applicable to your income.
Is the interest on IDFC infrastructure bonds tax deductible?
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.
NHAI or REC: which bond is better?
REC bonds have a somewhat higher rating than NHAI bonds. Because NHAI bondholders must request for surrender of bonds at maturity, which is after 5 years, and only then is the maturity amount redeemed and paid by cheque or ECS. It will be automatically redeemed and paid by check or ECS in the case of REC bonds.
How do I acquire 54 EC bonds?
This post will show you how to apply for 54EC Capital Gains Tax Exemption bonds online and pay using net banking or debit card, either through a broker or directly.
I intend to sell our previous residence. I’d like to put money into 54EC bonds. Is there a way to invest over the internet? I don’t want to reinvest in property and I also don’t want to pay taxes, thus I want to invest this money Amol Chavan
Our Answer: 54EC bonds are designed for investors who want to make long-term capital gains. You can obtain a tax break on long-term capital gains by investing in these bonds. They are known as 54EC bonds because they qualify for a tax deduction under section 54EC of the Income Tax Act.
The investor should have the following information and documents in PDF format ready before we begin the online process.
Karvy offers three bond issuers the ability to invest in 54EC bonds online.
1. Select the “For the bond issuer you like, click the “Fill a New Form Online” button.
2. Complete and submit the online application form.
3. Upon successful application submission, you will receive an SMS.
4. Fill out the application form completely.
5. Print the aforementioned form and have all applicants certify their signatures (s).
6. Scan the application copy, which has been signed by all applicants, and save it as a PDF.
7. Select the “Upload Application/KYC Documents” option should be selected.
8. To validate the application form, enter the following application details as they were supplied online.
9. Make a click “To receive an OTP on your email and mobile, click the “Get OTP” button.
10. Click on the OTP that was sent to your phone or email address “Verify.”
11. The application information will be displayed after validation.
12. To proceed with payment, please upload the following valid PDF documents.
13. Payment will be enabled once the above documents have been uploaded.
14. Use Netbanking or a Debit Card to make a payment.
15. Whether the payment is successful or unsuccessful, an acknowledgement will be prepared and sent through email.
Here is a little tutorial for investors who want to accomplish everything from application to payment without using a broker. The procedure for REC bonds has been described. Others, such as PFC and IRFC, go through a similar procedure.
1. Click here to download the REC bond form
2. Select the ‘direct’ option on the download page.
3. Enter the captcha after selecting the quantity of forms to download.
4. A ZIP file containing the form pack will be downloaded.
5. Once you’ve unzipped the file, you’ll see a PDF of the actual form (marked as private and confidential).
6. Complete the form and gather the necessary documentation on your own.
7. Investors must submit the completed Application Form, along with a Demand Draft or account payee cheque payable to “REC Ltd- 54EC” or “Rural Electrification Corporation Limited 54EC Bonds” and the required enclosures, to the designated branches of collecting banks Axis Bank, Canara Bank, HDFC Bank, ICICI Bank, IDBI Bank, IndusInd Bank, or Union Bank.
You can also make a direct NEFT/RTGS deposit into the REC collection account and fill out the application forms found on the REC website, making sure to include the UTR number in the box provided. Here are the bank account details for transferring funds.
G 3/4, 19 K G Marg, Surya Kiran Building, New Delhi 110001 is the branch address.
8. Visit http://www.recindia.nic.in/capital-gain-tax-exemption/ or call RTA/REC Investors Services Cell at 011-43091527 or 011-24361320 for allotment/ servicing status or any other information.