Interest on Securities

As per Indian Income Tax Act, "Interest on securities" means,

  1. Interest on any security of the Central Government or State Government;

  2. Interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a statutory corporation.

It is chargeable under the head "Income from Other Sources", if it is not chargeable under the head "Profits and Gains of Business or Profession".

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Taxable Interest on Securities Calculation

For Income Tax Purpose, Interest-on-Securities income is computed as under: -

Particulars
Interest on Securities XXX
Less: -
Commission and Brokerage Paid to Bank XXX
Commission and Brokerage Paid to Others XXX
Any other Expenditure XXX
----
XXX
----
Net Interest-on-Securities XXX
Less: - Exempt under section 10(15) XXX
----
Taxable Interest-on-Securities XXX
----

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Income Tax Exemption u/s 10(4) for Non-Residents

Section Eligible Assessee Nature of Income
10(4)(i) Non-Resident Interest on securities or bonds notified by the Central Government before 01-06-2002.
10(4)(ii)
  • Individual being Resident outside India under Foreign Exchange Regulations Act, 1993.

  • Individual, permitted by Reserve Bank Of India.

Interest on Non-Resident (External) Account.
10(4B) Indian Citizen or person of Indian Origin being a Non-Resident. Interest on national Savings Certificates notified by Central Government before 01-06-2002, purchased in convertible foreign exchange.

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Income Tax Exemption u/s 10(15)(i)

Income Tax Exemption u/s 10(15)(i) for Interest-on-Securities is available for all assesses for the following incomes.

  1. Income by way of interest, premium on redemption or other payment on such securities, bonds, annuity certificates, other certificates issued by Central Government and deposits as notified by the Central Government;

  2. Deposits notified by Central Government:

    Interest On Securities Income Tax Calculation Interest-On-Securities Taxation

    • 12-year National Savings Annuity Certificates

    • National Defence Gold Bonds, 1980

    • Special Bearer Bonds, 1991

    • Post Office National Savings Certificates

    • Post Office Savings Bank Accounts

    • Post Office Cumulative Time Deposits Rules, 1981

    • Treasury Savings Deposit Certificates

    • Post Office Cash Certificates

    • National Plan Certificates & National Plan Savings Certificates

    • Public Account under Post Office Savings Rules upto Rs.5,000.

    • Scheme of Fixed Deposits governed by the Government Savings Certificates (Fixed Deposits) Rules, 1968.

    • Scheme of Fixed Deposits governed by the Post Office (Fixed Deposits) Rules, 1968.

    • Special Deposit Scheme, 1981

  3. Interest on Non-Resident (Non-Repatriable) Rupee Deposit Scheme in the hands of Non-Resident only.

  4. Interest on Resident Foreign Currency Account.

  5. Interest on Resurgent India Bonds issued by State Bank of India.

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Exemption u/s 10(15)(ii-b)

Exemption u/s 10(15)(ii-b) is available for Individuals & HUFs, for Income received as Interest on Capital Investment Bonds notified before 01.06.2002.

  • 10 year Defence Deposit Certificates

  • 12 year National Defence Certificates

  • Government of India Defence Certificates

  • Premium Prize Bonds, 1963

  • 7 year National Savings Certificates (II & III) Issue

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Exemption u/s 10(15)(ii-c)

Exemption u/s 10(15)(ii-c) is available for Individuals & HUFs, for Income received as Interest on notified Relief Bonds.

  • 10% Relief Bonds

  • 9% Relief Bonds

  • 8.5% Relief Bonds

  • 6.5% Relief Bonds

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Exemption u/s 10(15)(ii-d)

Exemption u/s 10(15)(ii-d) is available for Interest received by Individuals being a

  • Non-resident Indian owning the bonds, or

  • Nominee or survivor to such bonds, or

  • Person to whom the bonds were gifted.

  • NRI Bonds 1988,

  • NRI Bonds II Series.

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Exemption u/s 10(15)(iv)

  • A scheduled Bank to a non-resident or to a person who is not ordinarily resident on deposits in foreign currency accepted as approved by RBI;

  • A public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes on any moneys borrowed by it in foreign currency from sources outside India under a loan agreement approved by the Central Government (before 01.06.2003) upto the rate notified.

  • Notified Bonds and Debentures of any Public Sector Company.

  • Deposits made by an employee of the Central Government or State Government or a Public Sector Company under a scheme approved by Central Government, out of the moneys due to him on account of his retirement.

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Other Exemptions u/s 10(15)

Section Eligible Assessee Nature of Income
10(15)(iii) Any assessee Interest on securities held by the Issue Department of the Central Bank of Ceylon.
10(15)(v) Any assessee Interest on deposits for the benefit of Bhopal gas leak disaster victims.
10(15)(vi) Any assessee Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme.
10(15)(vii) Any assessee Interest on bonds issued by a local authority, which are notified by the Central Government.
10(15)(viii) Any assessee being a non-resident or not-ordinarily resident Interest received in India on deposits made on or after 01.04.2005 in Offshore Banking Units.
10(15) Any assessee Certain other interest payable on notified investments in respect of which agreements were entered or loans were borrowed before 01.06.2001.

Note: Where any interest income is given net of tax deducted at source, it should be grossed up for inclusion.

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