Current · Source: Reserve Bank of India · RBI/2007-08/141 · issued 19 Sep 2007 · ~2 min read
Quick answerTDS on 8% Savings (Taxable) Bonds, 2003 applies from June 1, 2007, on interest exceeding Rs. 10,000 per financial year, regardless of investment date. Existing bondholders are covered. TDS is triggered on interest credited or paid, not just at maturity.
The rule, in the simplest words
From June 1, 2007, banks must take out TDS (tax deducted at source) on interest that is more than Rs. 10,000 in a financial year for 8% Savings (Taxable) Bonds, 2003.
The rule applies to every bondholder, even if they bought the bond before June 2007.
TDS is taken when the interest is credited or paid during the year, not only when the bond finally matures.
Banks have to give the depositor a Form 16A (a tax receipt) whenever they deduct TDS.
All designated branches of SBI, other nationalised banks, ICICI, IDBI, HDFC, AXIS and SHCIL must follow these steps.
How it plays out — a real example
Ravi, a senior officer at the SBI branch in Mumbai, sees that a customer’s 8% Savings Bond earned Rs. 12,500 interest this year. He immediately deducts the required TDS from the interest credit, records it, and later sends the customer a Form 16A, ensuring the bank complies with the June 1 2007 rule.
What changed
The Government of India provided clarifications on TDS applicability for 8% Savings (Taxable) Bonds, 2003. TDS is effective from June 1, 2007, and applies to all bondholders, including existing ones, if annual interest exceeds Rs. 10,000. Tax must be deducted when interest is credited or paid, not deferred to maturity.
What it means for you
Banks and designated branches must deduct TDS on interest for these bonds from June 1, 2007, irrespective of when the bond was purchased. For cumulative interest schemes, TDS is due on interest credited or paid during the year, not only at maturity. Form 16A must be issued to depositors where TDS is applied.
What you must do
Update systems to deduct TDS on interest exceeding Rs. 10,000 per financial year for all bondholders from June 1, 2007.
Issue Form 16A to depositors for any TDS deducted on interest credited or paid.
Instruct designated branches to apply TDS on interest credited or paid, not just at maturity, for cumulative scheme holders.
Ensure compliance for existing bondholders as date of investment is irrelevant for TDS applicability.
Who it affects
State Bank of India and 17 nationalised banks, ICICI Bank, IDBI Bank, HDFC Bank, AXIS Bank, Stock Holding Corporation of India (SHCIL), Designated branches operating the 8% Savings Bonds scheme, All bondholders of 8% Savings (Taxable) Bonds, 2003
❓ Common questions
Regulatory timeline
Stated effective dateeffective from June 1, 2007
Decoded by BankPulse2026-06-19 15:19 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Does TDS apply to bondholders who invested before June 1, 2007?
Yes, TDS applies to all bondholders, including existing ones, if interest credited or paid on or after June 1, 2007 exceeds Rs. 10,000 for the financial year.
When is TDS deducted for cumulative interest bonds?
TDS is deducted when interest is credited or paid, whichever is earlier, not only at maturity. This applies even if the bondholder uses mercantile accounting.
Will Form 16A be issued for TDS on cumulative interest?
Yes, Form 16A must be issued to the depositor wherever TDS on interest has been made, including for cumulative interest bonds.
📜 Read the original circular — full text as issued by RBI
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-08/141 · issued 19 Sep 2007. The plain-English explanation above is BankPulse’s own independent summary.
Instruct designated branches to apply TDS on interest credited or paid, not just at maturity, for cumulative scheme holders.
💻 IT / Systems
Update systems to deduct TDS on interest exceeding Rs. 10,000 per financial year for all bondholders from June 1, 2007.
📜 Compliance
Issue Form 16A to depositors for any TDS deducted on interest credited or paid.
Ensure compliance for existing bondholders as date of investment is irrelevant for TDS applicability.
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 17 nationalised banks, ICICI Bank, IDBI Bank, HDFC Bank, AXIS Bank, Stock Holding Corporation of India (SHCIL), Designated branches operating the 8% Savings Bonds scheme, All bondholders of 8% Savings (Taxable) Bonds, 2003), your first concrete step on “TDS on 8% Savings Bonds 2003: Govt Clarifications” is: “Update systems to deduct TDS on interest exceeding Rs. 10,000 per financial year for all bondholders from June 1, 2007.” (RBI issued this 19 Sep 2007).
Action required: Update systems to deduct TDS on interest exceeding Rs. 10,000 per financial year for all bondholders from June 1, 2007.
Action required: Issue Form 16A to depositors for any TDS deducted on interest credited or paid.
Action required: Instruct designated branches to apply TDS on interest credited or paid, not just at maturity, for cumulative scheme holders.
Action required: Ensure compliance for existing bondholders as date of investment is irrelevant for TDS applicability.
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=3820&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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