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Tax
Twelve months and 12.5% if the paper is listed; deemed short-term at slab if it is not.
Debt is a tax story before it is a yield story. Since 23 July 2024 a listed bond, debenture or government security held over twelve months is long-term at 12.5% without indexation, while an unlisted bond or NCD is deemed short-term under section 50AA however long you held it — every rupee of gain at slab. Interest is a third piece, taxed every year at slab regardless of the price move. That is why a lower-coupon listed bond can beat a higher-yielding unlisted one on money you keep.
| Asset | Long-term after | Short-term | Long-term |
|---|---|---|---|
| Listed bonds / G-secs | 12 months | Your slab | 12.5% |
| Unlisted NCDs / bonds | Always short-term | Your slab | — |
Listed debentures and government securities use the twelve-month listed test. Long-term gains pay 12.5% without indexation; short-term gains, and gains on any listed paper sold inside twelve months, join your income at slab. Before 23 July 2024 the long-term rate for other bonds and debentures was 20% with indexation, and the CBDT's FAQ records the switch to a uniform 12.5% without it for all asset classes.
The Finance (No. 2) Act, 2024 amended section 50AA so that gains on unlisted bonds and unlisted debentures transferred, redeemed or matured on or after 23 July 2024 are deemed short-term irrespective of the holding period. There is no long-term treatment to reach, and the same deeming applies to market-linked debentures. The practical effect: an unlisted NCD must pay you enough extra coupon to beat a listed bond after slab, not after 12.5%.
Coupon income, accrued interest paid on a purchase and the discount on a T-bill held to maturity are each treated on their own footing — interest at slab as it accrues, the T-bill's discount as a capital gain. So a bond's total tax is not a single rate: it is a slab-rate income stream plus a capital gain whose rate depends on listing and holding period.
Short-term capital losses can be set off against other capital gains (long-term losses only against long-term gains), so a bond sold at a loss is not a dead end for the year's tax. And a long-term gain on any asset can be rolled into section 54EC bonds within the prescribed window, up to ₹50 lakh, which is one of the few rollovers still standing after the 2024 changes.
Compare slab against 12.5% on a bond gain →
No — section 50AA deems the gain short-term for unlisted bonds and debentures transferred, redeemed or matured on or after 23 July 2024, irrespective of holding. It is taxed at your slab, and the long-term rate is not available however long you hold.
At your slab, as income, in the year it accrues — separate from the capital gain on the bond's price. TDS may be deducted at source depending on the interest amount and your status, and it is adjustable against your liability.
Not usually. A T-bill's discount to face is a capital gain if held to maturity, but a bond bought below face and held earns coupon income (slab) plus a redemption gain (capital gains, rate depends on listing and holding). The two legs are computed and taxed separately.
Reviewed 25 Sept 2026. Tax rates are set by statute and change with the annual Finance Act, so the Income Tax Department's own pages are the authority — every claim here links to one, with the snapshot date noted where the department's site refused an automated read.