Latest News | Stakeholders Call for Rollback of TDS on Listed Bond Coupon Payments in Upcoming Budget
Get latest articles and stories on Latest News at LatestLY. Ahead of the Union Budget, industry stakeholders have urged the government to revisit the 10 per cent Tax Deducted at Source (TDS) introduced on coupon payments from listed bonds.
Kolkata, Dec 24 (PTI) Ahead of the Union Budget, industry stakeholders have urged the government to revisit the 10 per cent Tax Deducted at Source (TDS) introduced on coupon payments from listed bonds.
While the policy is aimed at improving tax compliance, it has created unintended challenges for fixed-income investors, particularly retail participants, an official said on Tuesday.
"The TDS mechanism introduced in April 2023 has added complexities in cash flow management for investors, especially those who acquire bonds in the secondary market," Vishal Goenka, co-founder of IndiaBonds.com, said.
“This is because TDS is deducted on the entire coupon payment, even if the investor has already paid accrued interest to the seller when buying the bond,” he said.
The mismatch disrupts cash flow expectations and introduces inaccuracies in Yield-to-Maturity (YTM) calculations, a key metric for bond investors and should be reviewed in the forthcoming budget, said tax expert Narayan Jain.
The official also highlighted the challenges faced by senior citizens.
"While forms like 15G and 15H can exempt them from TDS, the process can be cumbersome and lead to unintentional deductions requiring time-consuming refund claims. This adds unnecessary administrative burdens for those relying on regular coupon income," Goenka said.
Stakeholders believe that eliminating TDS on coupon payments would streamline the investment process and enhance the predictability of bond returns.
This, in turn, would encourage greater retail participation in the bond market, aligning with the government's objective of deepening market participation and fostering a more inclusive investment landscape.
"India's bond market has witnessed significant growth in recent years, driven by technology-based platforms like Online Bond Platform Providers (OBPPs) and progressive regulations. Removing TDS would further support this growth by simplifying the investment process and attracting a wider investor base," he added.
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