What is TDS (Tax Deducted at Source)?

TDS is a way for the government to collect tax directly from your income by having it deducted at the time of payment, like rent, salary, or interest.

How does the new TDS rule on government bonds work?

Starting October 1, 2024, a 10% TDS will be deducted from any interest earned on government bonds, including central and state government bonds.

How can I reduce or avoid TDS on government bond income?

You can submit Form 15H (for those 60 and above) or Form 15G (for others) to declare that your income is below the taxable limit, which can help you avoid or reduce TDS.

What happens if too much TDS is deducted?

If too much TDS is deducted, you can claim a refund when you file your income tax return at the end of the financial year.

When should I submit Form 15H or 15G?

Submit the form at the beginning of the financial year to avoid TDS deductions on your bond income.

What is TDS (Tax Deducted at Source)?

TDS is a way for the government to collect tax directly from your income by having it deducted at the time of payment, like rent, salary, or interest.

How does the new TDS rule on government bonds work?

Starting October 1, 2024, a 10% TDS will be deducted from any interest earned on government bonds, including central and state government bonds.

How can I reduce or avoid TDS on government bond income?

You can submit Form 15H (for those 60 and above) or Form 15G (for others) to declare that your income is below the taxable limit, which can help you avoid or reduce TDS.

What happens if too much TDS is deducted?

If too much TDS is deducted, you can claim a refund when you file your income tax return at the end of the financial year.

When should I submit Form 15H or 15G?

Submit the form at the beginning of the financial year to avoid TDS deductions on your bond income.

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How To Reduce TDS On Government Bonds In 2025?

Neha Gupta

Author

Updated: 28-01-2025 at 6:40 AM

How To Reduce TDS On Government Bonds In 2025?

In the Union Budget 2024 it was announced that TDS will be deducted at 10% from specific central and state government bonds, including floating rate bonds. It will be implemented from October 1, 2024. The CEO of InCred Money, Vijay Kuppa said "In the Union Budget 2024, the Government has proposed a 10% TDS on all central government securities, state government bonds, and state development loans (SDLs), effective from October 1, 2024.”

What Is Tax Deductable At Source And How Does It Work?

TDS is a part of income tax. It has to be deducted by a person for certain payments made by them like rent, commission, professional fees, salary, etc. It is a way for the government to collect tax directly from people’s income.

Let’s understand how TDS works with an example.

Rahul pays Rs 1,00,000 per month as rent for an office to the property owner. By law, Rahul needs to deduct 10% as TDS. This means Rahul will deduct Rs 10,000 as tax and give the remaining Rs 90,000 to the owner. So, the owner receives Rs 90,000 after the tax is deducted. Later, the owner will add the full amount of Rs 1,00,000 to his income when filing taxes and can use the Rs 10,000 that Rahul already paid as a credit towards his final tax bill.

What Is The New Rule?

The government introduced a new rule that imposes a 10% Tax Deducted at Source (TDS) on income from government bonds. With the new rule introduced by the government, any interest earned from government bonds will now have a 10% Tax Deducted at Source (TDS) applied.

Let’s understand with an example.

If Mr X earns Rs. 10,000 in the form of interest from government bonds, 10% of the amount, which is Rs. 1,000 will be deducted as tax before he receives the money. This means that instead of getting the entire Rs. 10,000, he will only receive Rs. 9,000.

However, TDS is not an additional tax but is a method for the government to collect tax early. When filing their tax return at the end of the year, they will report the full ₹10,000 as income. They can then use the ₹1,000 that was already deducted to reduce their total tax liability. If more TDS was deducted than necessary, they could be eligible for a refund.

When less TDS is deducted, taxpayers receive more money. This money can then be reinvested to gain more. It also saves them the hassle of waiting for a refund when filing their tax returns.

How To Pay Lower TDS Or Zero TDS?

Taxpayers can still avoid paying TDS or reduce the 10%. The government has allowed investors to submit a specific certificate that will help them lower the TDS rate or even avoid it completely.

Get Form 15H or Form 16G.
Declare that the total income is below the taxable limit, so no TDS should be deducted.
Fill out the form with the necessary details.
Submit the form to the organisation or bank from which the government bonds are being purchased.

Form 15H is for individuals who are 60 years old or above, while Form 15G is for others. To be eligible, your total annual income should be below the taxable limit set by the government.

This has to be done during the beginning of the financial year to avoid paying TDS deductions.

Conclusion

The new rule introduced by the government might be a bit financially straining for taxpayers, but staying informed and updated on TDS can help them reduce the impact of the deduction. By following the mentioned steps and submitting the Forms, individuals can help reduce or even completely cut down the TDS on their bond income.

Visit Jaagruk Bharat for the latest insights on income tax and more.

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