Tax
Bonds, NCDs and G-secs: listed and unlisted are not close
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.
Rates on this page
| 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 paper: twelve months, then 12.5%
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.
Unlisted paper: short-term by statute
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%.
Interest is separate and always at slab
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.
Two reliefs worth knowing about
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 →
Questions on bonds, ncds and g-secs
Is there a long-term holding period for unlisted NCDs?
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.
How is the interest on a listed bond taxed?
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.
Does buying a bond at a discount make the whole return a capital gain?
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.
Sources
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.
- Income Tax Department — Sale of Debentures (Tax Guide)Post-23-Jul-2024 bond and debenture table: listed bonds/debentures and government securities at 12.5% long-term without indexation, unlisted ones deemed short-term under section 50AA whatever the holding; the 12-/24-month holding table; and that no deduction under sections 80C to 80U is available against short-term gains taxed at the concessional 15%/20% rate.Read: Internet Archive snapshot of 20 Mar 2026.
- Finance (No. 2) Act, 2024 — as summarised in the Income Tax Department's capital-gains guidanceRemoval of indexation for transfers on or after 23 Jul 2024 with the long-term rate set at 12.5%; the grandfathering option for resident individuals and HUFs on land or a building acquired before 23 Jul 2024; the section 50AA amendment deeming unlisted bond and debenture gains short-term.Read: Internet Archive snapshot of 14 May 2026.
- Income Tax Department — Capital Gain (Tax Guide)Two holding periods since 23 Jul 2024 (12 months listed securities, 24 months other assets); section 111A short-term rate of 20% on STT-paid equity shares, equity-oriented funds and business-trust units; section 112A long-term rate of 12.5% on the same assets above ₹1,25,000; the uniform 12.5% long-term rate without indexation; the deemed short-term list (depreciable assets, market-linked debentures, specified mutual funds, unlisted bonds and unlisted debentures).Read: Internet Archive snapshot of 14 May 2026 (the department's live pages return 403 to this host).
- CBDT — FAQs on the new capital-gains regime (via PIB, 24 Jul 2024, PRID 2036604)Effective 23 Jul 2024; the two holding periods; gold's long-term test reduced from 36 to 24 months; STT-paid listed-equity short-term rate raised from 15% to 20% and the long-term rate from 10% to 12.5%; the section 112A exemption raised from ₹1 lakh to ₹1,25,000 from FY 2024-25 onwards; other long-term gains at 12.5% without indexation; rollover benefits unchanged (section 54EC bonds up to ₹50 lakh).Read: Live fetch, 25 Sep 2026.