What are Bonds?

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What are Zero Coupon Bonds

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Taxability of Zero Coupon Bonds

Taxability On Maturity

As per section 2(47) the maturity of zero coupon bonds shall be regarded as transfer and capital gains will be computed on it.

 

Taxability Before Maturity

However, if they are sold before maturity then also capital gains is computed   . 

Period of Holding

In case of Zero Coupon Bonds,period of holding should be more than 12 months to be classified as long term

 

 

Capital Gain on Zero Coupon Bonds can be both Short Term or Long Term 

 

  1. If they are held for a period up to 12 months

             Short term capital gains is computed as these are STCA

 

  1. b) If they are held for more then 12 months then

                Either LTCG computed with indexation taxable at 20%

                                                 or

                 LTCG Computed without taxation taxable at 10%

             as per the choice of the assessee .

 

Same is also applicable in case of

  • Listed Shares
  • Mutual Fund issued betweeen 1/04/14 to 30 July 2014

 

QUESTIONS

 

Q1

Mr A purchased a zero coupon bonds for Rs 72000 on 15 May 2012

Its par value on maturity is Rs 100000 on 14 May 2015

Fair Market value on different dates is

Date FMV
31-Mar-13 76000
31-Mar-14 84000
31-Mar-15 95000
14-May-15 100000

 CII for 2012-13,2013-14,2014-15,2015-16 are 852,939,1024,1081

Calculate Capital gain if he helds the asset till maturity

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Q2
Suppose in Q1 he sells the Zero Coupon Bond on 31-3-13 for 76000

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Q3
Suppose in Q1 he sells the Zero Coupon Bond on 31-3-14 for 95000

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  1. Income Tax
  2. Income from Capital Gains

About the Author

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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides GST Training in Delhi. Register now.