Tax Treatment of Maturity of 6.5 %RBI Saving Bonds

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Siddharth Mittal (Querist)
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28 August 2010 Sir,

Please clarify whether the RBI 6.5 % Saving Bonds are exempt from tax on the proceeds received on maturity. (Interest is Exempt but what about the principal amount??)
If so, then please let me know the section under which these are exempt.
If not, then how will these be treated. (as long term/ will be included in the income)

Thanks

CA PRAMOD SARAOGI

CA PRAMOD SARAOGI (Expert)
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29 August 2010 Maturity proceeds of RBI 6.5% Saving Bonds are not taxable. How could it be made taxable when it is not covered under EET mode like NSS . The maturity proceeds received would not have any element of profit in it . It is only the principle amount that the investor would receive.

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Siddharth Mittal

Siddharth Mittal (Querist)
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29 August 2010 But Sir, is there any thing mentioned anywhere regarding this.
As everywhere it is mentioned that the interest earned is tax free "However, there is no tax benefit on the amount invested in these bonds."

Please clarify with some proof of any link or reference to any section of act.

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