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CMA Intermediate · Direct and Indirect Taxation · Basic Concepts, Basis of Charge and Capital and Revenue Receipts

Ms. Anika Rao, a non-resident, holds bonds of an Indian company issued under a notified scheme and bought in foreign currency. Her only income in the tax year is interest of ₹6,00,000 on these bonds. Under section 209 of the Income-tax Act, 2025, what is the income-tax payable on this interest, ignoring surcharge and cess?

The tax is ₹60,000. Section 209(1) taxes interest on notified Indian company bonds purchased in foreign currency by a non-resident at 10%, so 10% of ₹6,00,000 is ₹60,000. The 12.5% rate applies only to long-term capital gains on transfer.

  1. A₹60,000Correct
  2. B₹72,000
  3. C₹75,000
  4. D₹1,80,000

Explanation

Table Sl. No. 1 of section 209(1) taxes interest on such bonds bought in foreign currency at 10%. Tax = 10% x 6,00,000 = ₹60,000. The 12.5% rate (₹75,000) applies only to long-term capital gains on transfer of these bonds, not to interest.

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