Regular Taxation Of Bonds in India

The interest earned from Bonds is taxed as per marginal slab rate, and the maximum slab rate is 30 %. Appreciation of the bond price is considered as capital gain and taxed accordingly. If these bonds are held for the long term ( more than 12 months for listed bonds and more than 36 months for unlisted bonds), the capital gain tax will be 10 %.

Short-term capital gain tax can be 5% to 30%.

Tax-Free Bonds

In the case of Tax- free bonds, the interest earned from bonds is not taxed, but price appreciation of the bonds during maturity (or sale) is considered as capital appreciation. Hence capital gain taxes are applicable.