I have purhcased DHANILOANS-N8 NCD (ISIN INE614X07092) @1550 on 03-10-2023.
Its maturity date was 08-03-2024 and on maturity Rs. 1686.26 has to be paid on each NCD. Yesterday, I received amount but when I calculated, I found out to be Rs. 1617.62 only. I then realized that the company has deducted TDS on whole amount. Its issue price was 1000.
So total interest would be 686.26 per NCD and Rs. 68.26 per NCD is deducted as TDS. No problem in it. But I had purchased it @1550 and that too only a few months back, so why my purhcase it being treated as Rs. 1000 per NCD.
Also, in my earlier post of PFC NCD interest (PFC Debenture received but 10% less – #4 by Aditya_Gupta), still I haven’t received any information from company regarding TDS neither TDS deduction is showing in TRACES/FORM 26AS. This new process is making investment in NCD complicated.
How can I recover the excess TDS amount?
I’m not understanding why TDS will change based on your buy price?
Interest is fixed and TDS on that also is fixed. How is buy price coming into the picture?
Dhani doesn’t even know your buy price. You bought it in open market by paying premium
why couldn’t they just pay the whole amount and let taxpayer decide the amount of tax. Suppose if anyone purchases bond 1 week before at 1650. Instead of profit, he will be in loss due to TDS. Sometimes there are 4-5 different bonds maturing in a year, so it will be a headache checking how much TDS is there, is it showing under 26AS, how will it get refunded etc. etc.
Because it generates a steady source of income for the government. Otherwise they will get a huge lumpsum at the end of the year, and have to borrow throughout the year.
And people will find 100 ways to avoid paying at the end of the year.
Why will you be in loss? You’re supposed to calculate the returns and then bid a amount suitable to you.
If you overpay for something how is it the governments fault lmao. Calculate the interests and XIRR and decide a suitable bid.
At the end the original 1000 amount of the bond will be credited to your amount right.
Also, I’m not understanding how you paid 1500 something. How come the bond price is going on increasing when the interest to be paid decreases as time passes on? It should start at bond value + interest and keep going down as interest installments are paid right? I am new to bonds so not able to understand why price keeps increasing. Since the payments to be made by the NBFC goes on decreasing.
That is not any different from the headache calculating the tax you owe. Atleast with TDS you have a list of stuff you have earned in the year. Headache is less actually. Imagine something didn’t come up in 26AS and you forgot to file it.
It won’t show in 26AS immediately. They update quarterly maybe. Just check after March right. If TDS doesn’t show up but it is deducted it is not your fault
You can avoid all this by bidding only in primary markets and not secondary market. The bid-ask spread is always a headache due to low liquidity in bonds.
there are some bonds which are called as zero coupon bonds. These types of bonds didn’t pay interest monthly, quarterly or annualy rather interest is accumulated till the maturity of the NCD and paid at the time of maturity. So, in my example Dhani issued Rs. 1000 NCD on 08-03-2019 and didn’t paid interest in last 5 years. On maturity, it is paying all interest and maturity, i.e. 1686.
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Cool, thanks for the detailed explanation. When you mentioned TDS I thought it is quarterly repayments.
I think price won’t increase after considering tax.