What changed
The Government of India issued a notification on May 31, 2007, implementing TDS on interest from 8% Savings (Taxable) Bonds, 2003, effective June 1, 2007. Previously, such interest was exempt from TDS under the proviso to Section 193. The threshold for TDS deduction is interest exceeding ₹10,000 in a financial year.
What it means for you
Banks and designated agencies (like SHCIL) must now deduct tax at source on interest payments above ₹10,000 for these bonds. This adds compliance burden for payout systems and requires updating systems to track annual interest per bondholder. No other terms of the bond scheme changed.
What you must do
- Update your systems to apply TDS on 8% Savings (Taxable) Bonds, 2003 interest exceeding ₹10,000 per financial year from June 1, 2007.
- Circulate the Government notification to all branches and offices handling these bonds.
- Ensure staff are trained on the new TDS threshold and deduction process.
- Coordinate with SHCIL and other agencies for consistent implementation.
Who it affects
State Bank of India and associate banks, 17 nationalised banks, ICICI Bank, IDBI Bank, HDFC Bank, UTI Bank, Stock Holding Corporation of India Ltd (SHCIL), All branches handling 8% Savings (Taxable) Bonds, 2003
What is the effective date for TDS on these bonds?
TDS applies from June 1, 2007, on interest exceeding ₹10,000 in a financial year.
Does this change any other terms of the 8% Savings Bonds?
No, only the TDS provision is added; all other terms and conditions remain unchanged.