Is TDS deducted on bond and NCD interest?

Q: Is TDS deducted on bond and NCD interest?

Yes. Since 1st Apr 2023 issuers deduct 10% TDS from interest on listed debentures and NCDs (20% if your PAN is not on record), including bonds issued before that date. From 1st Apr 2026 the rule sits in section 393(1) of the Income-tax Act 2025 at the same rate, and 54EC capital gain bond interest is paid without TDS.

TDS on bond interest is deducted by the issuer that pays the coupon, not by the platform you bought from, and it is credited to your PAN as tax already paid.

What changed in 2023?

Until 31st Mar 2023 interest on listed debentures held in demat was exempt from TDS under clause (ix) of the proviso to section 193. The Finance Act 2023 omitted that clause, so TDS now applies to listed NCDs, including those issued earlier (EY, Vinod Kothari). The TradingQnA post flagging the change has 5,748 views (TradingQnA), yet the belief that listed NCDs carry no TDS still circulates.

What are the rates and limits?

Item	Treatment	How firm
Interest on listed corporate bonds and NCDs	10% TDS with PAN	Confirmed (EY)
No PAN on record	20% TDS	Reported (GoldenPi blog)
Annual threshold	₹10,000 of interest per issuer, after Finance Act 2025	Reported, not verified against the Act
Section from 1st Apr 2026	Section 393(1), Table Sl. No. 5(i), replacing section 193	Reported (TDSMAN)
54EC capital gain bonds	No TDS; interest taxable at slab	Platform terms (ICICI Direct)
RBI Floating Rate Savings Bonds	TDS applies	Confirmed (RBI)
G-secs, SDLs and T-bills	Generally not subject to TDS	Not confirmed from a primary source

What does TDS mean in rupees?

A ₹1 lakh face value bond with a 10% annual coupon pays ₹10,000 of interest. The issuer deducts ₹1,000 and credits ₹9,000 to your bank. If you are in the 30% slab you owe ₹3,000 in total on that interest, so ₹2,000 more is due when you file (before surcharge and cess). If your total income is below the taxable limit, you claim the ₹1,000 back as a refund.

Can I stop TDS being deducted?

If your income is below the taxable limit, you can give the payer a declaration so TDS is not deducted. Grip's FAQ now refers to Form 121 and an income limit for using it (Grip FAQ), which is reported to replace Forms 15G and 15H under the new Act; we have not verified this against the Act or CBDT rules. Because each issuer deducts its own TDS, a Reddit user asked in Aug 2026 whether the form goes to Stable Money or to every issuer (Reddit). Ask your platform in writing how it passes declarations to issuers and how far before the record date it needs them.

Will TDS be cut if I held the bond for only part of the year?

TDS is deducted on each coupon, paid to whoever holds the bond on the record date. If you buy just before a record date you receive the full coupon and bear TDS on all of it, even though part of it repays accrued interest you paid the seller. The tax treatment of that accrued interest is covered in reporting accrued interest in the ITR, and record dates in when is interest paid.

What should I check after each coupon?

Match the TDS shown in your annual tax statement against the coupon and the 10% rate. Wrong deductions do happen: a TradingQnA thread on wrong TDS on an NCD ran to 29 posts (TradingQnA). Raise a mismatch with the platform and the issuer before you file.