Is NCD tax free and returns on NCD taxable?
Taxation on NCD
As per section 193 of the Income Tax Act, 1961, there is no tax deduction at source (TDS) from any securities issued by a company, in a dematerialized form and listed on a recognized stock exchange in India.
Interest on NCD is taxed under head 'other sources' at applicable slab rates, paid periodically or cumulatively. Interest is not subject to tax deduction at source if NCDs are held in dematerialized form and are listed on a stock exchange. Profit on sale/ redemption of NCDs has to be offered to tax as 'Capital Gains'
For individual investors, if the NCDs are sold before a year, the profits will be added to the income of the investor and he will have to pay taxes at the same rate as per the income tax slab under long term or short term capital gain.
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