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TAXABILITY OF DEEP DISCOUNT BONDS

Income Tax - Tax Liability in special Circumstances / Specific Cases - 16 - The Central Board of Direct Taxes (CBDT) had issued letter dated March 12, 1996, which clarified the taxation of Deep Discount Bonds (DDB), being financial instruments offere .....

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to deduction of tax at source (TDS) under section 193/195 of the Income-tax Act, 1961 (the Act). When the bond is sold before maturity: The difference between the sale consideration and the bid price (for original subscriber) or cost of acquisition .....

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which no interest is paid at intervals, but on maturity lump sum amount is received. TAX TREATMENT OF DDBs In the year of purchase of bond Market value of bond as on 31st March of current financial year. Purchase price = Interest Income (Taxable as I .....

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On Transfer before maturity Sale consideration Market value of bond as on 31st March of last financial year = Capital Gain (Always Short Term)/ Business Income. Period of Holding shall be reckoned from the date of purchase/ subscription, or the last .....

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