The Investment & Taxes

What is Tax Deducted at Source (TDS)?. 

Tax is deductible at source income in investments. As per current tax laws, TDS is deducted where the interest paid exceeds Rs.2,500/- in a financial year. You can produce a certificate under section 197 of the Income Tax Act issued by an Assessing Officer to ensure that tax is not deducted at source at a lower rate. As an individual, you also have the option of filing Form 15H in duplicate with the registrar/company.

TDS deduction for those not liable

You have to submit an application in any of the prescribed forms depending upon the category you fall in e.g. individual, firm etc. The prescribed forms for different categories of investors are as follows:

	Form 15H - In the case of any person other than companies or firms, tax will not be deducted for interest on Bonds if you submit Form 15H in duplicate to the company. As per the provisions of Section 197A(1B) of the Income Tax Act, 1961 Form 15H cannot be submitted if income by way of interest/dividend etc. exceeds Rs. 50,000.
	Form 15AA - In the case of any person, tax will not be deducted for interest on Bonds if you submit Form 15AA, in duplicate to the company, which is issued by the Assessing Officers for Income Tax purpose.

When and how do I obtain the TDS certificates?

Half- yearly/yearly interest payments are generally issued with the TDS certificate printed on the reverse side of the counterfoil of the interest warrants. Thus, you would receive the TDS certificate with the interest warrant.

In the case of post dated monthly & quarterly warrants that are dispatched in advance, a consolidated TDS Certificate (Form 16A) is sent in the month of April of every year to the address specified by you.

Where can I obtain the Form 15H from?

In most cases the institution deducting the tax can provide a 15 H form.

Tax Benefits of bonds 

The Tax Saving Bond is a bond whose proceeds are deployed in accordance with the Income Tax Act, 1961 in infrastructure projects. Tax saving bond can either pay you interest regularly (say annually) or it can be in the nature of deep discount bond. The greatest attraction of the Tax Saving Bond is the tax rebate available under Section 88 of the Income Tax Act, 1961 in the year in which the amount is invested.

On the other hand, a regular income bond is a bond which pays you interest regularly say, annually, half-yearly etc. It is designed to meet the needs of people who want regular income. Subscription to the same does not entitle you to tax rebate available under Section 88 of the Income Tax Act.

Who can avail the tax rebate under Section 88?

The rebate is available only to individuals and Hindu Undivided Family (HUF's). Non Resident Indians (NRI's) can also avail of the rebate provided NRI's opt not to be assessed under the Special Provisions of chapter XII-A of the Income Tax Act, 1961.

What is the maximum amount eligible for rebate?

The maximum amount eligible for tax rebate is Rs. 1,00,000/- Out of this, Rs. 30,000/- can be invested only in infrastructure bonds. The balance Rs. 70,000/- can be invested in these bonds or in other avenues for e.g. Public Provident Fund.

For how long is the rebate available?

Tax rebate is availed in the year in which the amount is invested in the bonds.

What is the minimum holding period?

To avail of benefit under Section 88, such investment needs to be held for a period of at least three years. If these are sold or otherwise transferred within the period of 3 years, the tax rebate availed of earlier would become tax payable in the year of transfer.