You can pay 10% tax on returns from this debt investment vs 30% on debt mutual funds, bank FDs

economictimes.indiatimes.com:

taxation of debt mutual funds has changed from FY 2023-24. According to the amended income tax laws, investment made in specified debt mutual funds on or after April 1, 2023, would be taxed at income tax slabs applicable to your income at the time of redemption.

For investments made till March 31, 2023, the redemptions from such specified mutual funds will be taxed as per the holding period of the mutual fund schemes.

If the holding period of specified debt mutual funds is less than or equal to three years, then it will be taxed at the income tax slabs applicable to your income. If the holding period exceeds three years from the date of investment, then it will be taxed at 20% with indexation benefit.

It is important to note that income from most common debt investments is taxed at the income tax rate applicable on the individual's income.

For instance, if an individual's net taxable income is taxed at 30%, then interest from bank fixed deposits, RBI floating rate bonds, post office fixed deposits, etc, are also taxed at 30%.

Despite changes in the taxation of most common debt investments, there is still a debt investment whose long-term capital gains (LTCG) is taxed at 10% without indexation benefit. These are listed bonds.

An individual investing in listed bonds will also be eligible for LTCG being taxed at 10%.

S. Vasudevan, Executive Partner, Lakshmikumaran & Sridharan Attorneys, says, «The bonds listed on a recognised stock exchange will be classified as capital assets in the hands of the investors.

The sale/transfer of bonds will be subject to capital gains tax in the year in which the bonds are transferred. The sale/transfer of listed bonds will be classified as long-term capital gain if the investor has held them