CA Shraddha (Mcom, CS Exe.) (Service) (224 Points)
17 August 2011Hello to All
My question is in respect of taxability of amount received on redemption of non convertible debenture held for more than 12 months.
Whether it is possible that a person did not get any amount of interest throughout the holding period more than 12 months and what will be tax treatment of amount received on redemption?
Thankyou in anticipation.
Q1.Whether it is possible that a person did not get any amount of interest throughout the holding period more than 12 months?may be possible.....but chance is less
Q2.what will be tax treatment of amount received on redemption?
For income tax purpose, the debentures are treated like debt instruments.
The interest earned would be treated as any other interest (say, from a bank FD). It would be a part of your “Income from other sources”, and would be taxable.
However, whether there would be TDS (Tax Deducted at Source) or not depends on many factors, and would vary from one debenture issue to another.
A debenture is a capital asset. If you sell the debenture on the stock exchange before holding it for a year, it would be a short term capital gain – it would be included in your income and would be tax as per prevailing IT slabs.
If you sell it on an exchange after holding it for a year or more, the gain would be long term capital gain. This LTCG should be calculated without indexation, and would be taxed at 10% of the gain.
Completely agree with Deepak reply
In case of listed debentures -
If the period of holding is more than one year , would be termed as Long term capital gain and would be taxed @ 10% without indexation and if period of holding is one year or less than one year ,would be termed as short term capital gain and would be taxed as per normal slab rate.
In case of Non listed debentures -
If the period of holding is more than three years, would be termed as Long term capital gain and would be taxed @ 20% without indexation and if period of holding is 3 years or less than 3 years ,would be termed as short term capital gain and would be taxed as per normal slab rate.
Mukesh Kumar Singh
(CA-FINAL)
(4094 Points)
Replied 29 August 2011
Agreed with Mansha ji.....................
Sanmatindra K. Jain
(Investments)
(29 Points)
Replied 09 July 2018
Dear Shraddha,
Let me elaborate with numbers. I purchased NCD at 1050 (face value 1000) from stock market. It is redeemed on maturity for 1100 which is 1000 principal + 100 interest. At maturity, I want to know how much will be interest and how much will be capital gain:
1. Will interest be 100 and capital loss 50 (1050 - 1000)? Or
2. Will interest be 50 (1100 - 1050)?
CAclubindia
