I am planning to invest in RBI bonds. Can I prevent TDS at source? My fd interests and mutual fund dividends pay me around 6.5lakhs per year.

Ans: Yes, NRIs can claim refunds on the deducted TDS. For an NRI to claim a refund on the TDS deducted, he/she must compute their income and tax liability according to existing slab rates and file your IT Returns accordingly.

If there is a refund due as per the returns, it will be paid out to you after processing by the IT Department.

Ans: Yes, this is right from ITR point of view as you are accounting for it on a receipt basis.

Ans: Person can submit form 15H if total income is below the taxable limit. Super senior citizen (age 80 above), having income upto 5 lacs, is not liable to pay tax on income from interest and can submit Form 15H.

Ans: Hello Amit,

I understand your concern and it's great to see your proactive approach towards tax compliance.

As per the Income Tax Act, banks are required to deduct TDS on interest income when it exceeds Rs. 40,000 in a financial year (Rs. 50,000 for senior citizens). This is an automated process and banks follow this rule strictly.

However, if you wish to have TDS deducted even when your interest income is below Rs. 40,000, you may not be able to do so through the bank directly as their systems are designed to comply with the existing tax laws and automatically deduct TDS only when the interest income crosses the specified threshold.

That being said, you can still manage your tax liability effectively. You can calculate the tax on your interest income and pay it as Self Assessment Tax or Advance Tax, as applicable, through the Income Tax Department's e-payment facility. This way, you can ensure that your tax payment obligations are met in a timely manner.

Please consult with a tax advisor or chartered accountant for personalized advice based on your specific circumstances.

I hope this information is helpful.

Ans: Investing in bonds monthly is a safe way to grow wealth steadily. However, instead of investing directly in bonds, bond mutual funds offer better options.

Bond mutual funds provide diversification and professional management. They also eliminate the need to worry about individual bond risks like defaults.

Certified Financial Planners (CFPs) recommend investing through mutual fund distributors (MFDs). It simplifies the process and ensures expert guidance.

Challenges of Investing in Direct Bonds
High Minimum Investments: Direct bonds often require larger amounts than bond funds.

Limited Liquidity: Selling bonds before maturity can be challenging and may incur losses.

Complexity in Selection: Choosing the right bond demands market knowledge and regular monitoring.

Interest Rate Risk: Fixed returns may lose value due to inflation or rising rates.

Instead of direct bonds, bond funds provide flexibility and cost-effectiveness.

Why Use an MFD Instead of Online Platforms?
Platforms like IndiainBonds may seem convenient. However, there are drawbacks to investing without personalized guidance:

Limited Advice: Platforms don't offer tailored financial planning.

Transaction Focused: They prioritize transactions, not long-term financial goals.

Hidden Costs: There could be transaction fees or platform charges.

MFDs work alongside Certified Financial Planners to design suitable strategies.

Benefits of Bond Funds over Direct Bonds
Regular Income: Bond funds reinvest payouts, growing your corpus.

Professional Management: Expert fund managers handle portfolios.

Tax Efficiency: Long-term holding of bond funds aligns better with tax rules.

Ease of Investment: SIP options allow monthly investments with smaller amounts.

Diversification: Bond funds spread risks across multiple bonds.

New Tax Rules for Bond Fund Investments
Long-term gains from bond funds are taxed per your income slab.

Short-term gains are also taxed as per your slab.

Discuss taxation strategies with a Certified Financial Planner to maximize post-tax returns.

How to Structure Monthly Bond Fund Investments
Determine Investment Goals: Know the purpose of your investment.

Assess Risk Appetite: Select bond funds matching your risk level.

Choose the Right Fund: Opt for funds managed by reputed firms.

Monitor Performance: Review returns regularly with your CFP.

Start Systematic Investments: Use SIP to invest monthly.

Ensure Liquidity: Check for easy redemption features if needed.

Final Insights
Direct bonds may not suit all investors. Bond funds are simpler and safer alternatives.

Certified Financial Planners can offer holistic advice tailored to your needs. Invest through MFDs for consistent returns and better support.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment