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General / Key Terms / Tax related / Others
General
How are Bonds different from Fixed Deposits?
Key Terms A Tax Saving Bond is a bond, the proceeds of which are to be deployed in accordance with the Income Tax Act, 1961 in infrastructure projects. The greatest attraction of it is the tax rebate available under Section 88 of the Income Tax Act, 1961 in the year in which the amount is invested. Tax saving bond can either pay you interest regularly (say annuallywhich can be annual or monthly or quarterly) or it can be in the nature of deep discount bond. A Regular Income Bond is a bond, which pays you interest regularly say, annually, half-yearly etc.. It is designed to meet the needs of people who want regular income. Subscription to the same does not entitle you to the tax rebate under Section 88 of the Income Tax Act.
The face value of a
Bond is the amount that the issuer agrees to repay the bondholder
at maturity date. This amount is also sometimes referred to as par
value, maturity value, redemption value or principal value. Issue price of a Bond
is the price at which the Bond is originally issued by the issuer
to the investors. The tenure of a Bond
is the time period between the date of issue and the date of maturity. Maturity
date The coupon rate is
the interest rate that the issuer agrees to pay each year. The coupon
rate multiplied by the face value of the Bond gives the Rupee amount
of the coupon. For example, if an investor purchases a Bond of face
value Rs.5,000/- having a coupon rate of 7% payable annually, then
the investor will receive Rs.350 each year as interest or coupon
throughout the tenure of the Bond. A Bond Certificate
is a certificate, which establishes the title of the Bondholder
to the Bonds specified therein. Consolidated Bond Certificates An investor opting for a consolidated certificate will receive one certificate for the total number of Bonds invested in. Market lot is the minimum number of Bonds that can be traded on the stock exchange. The Deemed Date of Allotment is typically
fixed as 30 days from the date of closure of the Issue or date of
utilisation of proceeds, whichever is earlier. All benefits relating
to the Bonds will be available to the investors from the Deemed
Date of Allotment. The actual allotment may occur on a date other
than the Deemed Date of Allotment. No interest on application money
will be paid to any investor till the Deemed Date of Allotment.
As per the current provisions of Income-tax Act, 1961, (Act) , Tax Deduction at Source (TDS) is deducted on interest on Bonds where interest paid or payable to a resident individual bondholder exceeds Rs.2,500/- in a financial year. In case of all non-resident bondholders, tax will be deducted at source on interest at the rates as per prevailing Income-tax Act, 1961, or Double Taxation Avoidance Agreement, whichever is lower, subject to submission of relevant documents and fulfillment of conditions as may be amended from time to time. Certain specified entities whose income is unconditionally exempt under section 10 of the Act and who are statutorily not required to file return of income as per section 139 of the Act, CBDT has vide Circular no.4/2002 dated July 16, 2002, granted blanket TDS exemption. Alternatively, valid certificate under section 197 issued by your Assessing Officer can be submitted within the prescribed time frame for availing the benefit of lower or nil rate of TDS. What should I do if I am not liable to pay tax and TDS is not required to be deducted? To
avail the benefit of deduction of tax at source at Nil/lower rate,
you may submit any of the following documentation : Exemption for
insurance companies: When and how do I obtain the TDS certificates? In
the case of half- yearly/yearly interest payments, the TDS certificate
are printed on the reverse side of the counterfoil of the interest
warrants. Thus, you would receive the TDS certificate with the interest
warrant. Where can I obtain the Form 15G/15H from? When is it required to be submitted? ICICI
Bank as an investor friendly measure sends Form 15G to the investors.
In case the investor does not receive the same, he can write to
3i Infotech Limited at Maratha Mandir Annexe, Dr. A.R.Nair Road,
Mumbai Central, Mumbai-400 008. What are the tax implications on Deep Discount Bonds (DDBs)? The
tax treatment of DDBs will be in accordance with and subject to
the conditions in the CBDT clarification F. No. 149/235/2001-TPL
dated February 15, 2002 which are given in brief as under: (b) On transfer of bond before maturity, the difference between the sale price and the cost will be taxable as short-term capital gains or business income, as the case may be. For computing such gains, the cost of the bonds will be taken to be the cost of acquisition plus the income offered to tax in the earlier years as explained in clause (a) above. (c) In case
of redemption, the difference between the redemption price and the
value as on the last valuation date immediately preceding the maturity
date will be taxed as income. (d) A non-corporate investor holding DDBs upto an aggregate face value of Rs.1 lakh may opt to offer income for tax in accordance with earlier CBDT clarification dated March 12, 1996. The clarification states that the difference between the redemption price and subscription price would be treated as interest income assessable under the Income-tax Act in the year of maturity. It further states that on transfer of bonds before maturity, the difference between the sale price and issue price will be treated as capital loss/gains if held by the assessee as investments or as trading profit/loss if the assessee dealt in purchase of sale of bonds, securities, etc. (e) The difference
between the issue price and redemption price will be subject to
tax deduction at source under section 193 of the Income-tax Act
in the year of maturity.
What is the procedure for redemption of bonds? For bonds held in physical form, the bondholders are required to surrender the bond certificates duly discharged by the sole holder/ all the joint holders at least one month prior to the redemption date. ICICI Bank may however redeem the bonds without requiring the surrender of bond certificates. In such a case, the redemption proceeds would be paid to those bondholders whose names appear in the Register of Bondholders as on the record date fixed for this purpose. In case of bonds held in electronic form, no action is required on part of the Bondholders and the redemption proceeds would be paid to those bondholders whose names appear on the list of beneficial owners given by the Depositories to the Company. Presently, ICICI Bank has obtained the necessary approval for despatch of the redemption proceeds without requiring the surrender of the original bond certificates by the bondholders. The redemption warrants are dispatched to the investors on or before the due date of payment to the address recorded with us. However, the necessary redemption forms
(intimation of redemption) are sent to the investor informing them
the redemption procedure. What information should I provide in a correspondence to ICICI Bank to facilitate a quick response to my queries? Kindly provide the following information to facilitate a quick response:
All these details are available on the Bond Certificate. How to change the address / bank details / bank mandate on record ? A request letter {mentioning the new
address/ bank details i.e. name of the bank, branch, account no.,
( complete address of your banker in case of bank mandate) and ondholder
number } duly signed by the first holder is to be sent to the address
given below. 3i Infotech Limited When are the warrants are usually dispatched ? The interest / redemption warrants are normally dispatched 3-4 days prior to the due date of payment
3i Infotech Limited
All emails pertaining to ICICI Bank Bonds should be marked to investor@icicibank.com
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