TDS on 8% Savings (Taxable) Bonds, 2003 – Interest Over ₹10,000
Current · Source: Reserve Bank of India · RBI/2006-2007/424 · issued 31 May 2007 · ~2 min read
Quick answerFrom June 1, 2007, banks must deduct TDS under Section 193 of the Income Tax Act on interest exceeding ₹10,000 per financial year on 8% Savings (Taxable) Bonds, 2003. This applies to all paying branches.
The rule, in the simplest words
From June 1, 2007, banks must take out tax (TDS) from interest on 8% Savings Bonds if the interest in a year is more than ₹10,000.
This rule comes from a change in the Income Tax Act (Section 193) made by the Finance Act, 2007.
The government sent a paper (notification) on May 31, 2007, telling banks to follow this new rule.
Only the tax part changed; everything else about the bond stays the same.
Banks must tell all their branches and update their computer systems to do this.
How it plays out — a real example
Ravi, a branch manager at a nationalised bank, processes an interest payment of ₹12,000 on an 8% Savings Bond for a customer. He ensures the system deducts TDS on the amount over ₹10,000 before releasing the net interest, and issues a TDS certificate to the customer.
What changed
The government amended the proviso to Section 193 of the Income Tax Act via the Finance Act, 2007, removing the earlier exemption from TDS on these bonds. Effective June 1, 2007, any interest payment above ₹10,000 in a financial year on 8% Savings (Taxable) Bonds, 2003, now attracts tax deduction at source.
What it means for you
Banks and designated agencies (like SHCIL) must update their systems to apply TDS on interest payouts exceeding ₹10,000 per year for these bonds. This adds compliance burden for bondholders and requires clear communication to customers. No other terms of the bond scheme change.
What you must do
Update your core banking system to flag and deduct TDS on interest > ₹10,000 per financial year for 8% Savings (Taxable) Bonds, 2003, effective June 1, 2007.
Notify all branches and offices about this change and circulate the Government of India notification dated May 31, 2007.
Ensure TDS certificates are issued to bondholders as per Income Tax rules.
Train staff handling bond interest payments on the new deduction threshold.
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 paying interest on 8% Savings (Taxable) Bonds, 2003
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2006-2007/424 · issued 31 May 2007. The plain-English explanation above is BankPulse’s own independent summary.
Notify all branches and offices about this change and circulate the Government of India notification dated May 31, 2007.
💻 IT / Systems
Update your core banking system to flag and deduct TDS on interest > ₹10,000 per financial year for 8% Savings (Taxable) Bonds, 2003, effective June 1, 2007.
📜 Compliance
Ensure TDS certificates are issued to bondholders as per Income Tax rules.
Train staff handling bond interest payments on the new deduction threshold.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (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 paying interest on 8% Savings (Taxable) Bonds, 2003), your first concrete step on “TDS on 8% Savings (Taxable) Bonds, 2003 – Interest Over ₹10,000” is: “Update your core banking system to flag and deduct TDS on interest > ₹10,000 per financial year for 8% Savings (Taxable) Bonds, 2003, effective June 1, 2007.” (RBI issued this 31 May 2007).
Circular: RBI/2006-2007/424 -- TDS on 8% Savings (Taxable) Bonds, 2003 – Interest Over ₹10,000
Issued: 31 May 2007
Action required: Update your core banking system to flag and deduct TDS on interest > ₹10,000 per financial year for 8% Savings (Taxable) Bonds, 2003, effective June 1, 2007.
Action required: Notify all branches and offices about this change and circulate the Government of India notification dated May 31, 2007.
Action required: Ensure TDS certificates are issued to bondholders as per Income Tax rules.
Action required: Train staff handling bond interest payments on the new deduction threshold.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3561&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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