Tax on Profit on Debt
Tax on profit on debt [Section 7B, Division IIIA of Part I of the First Schedule]
Every person, other than a company, receiving profit on debt from persons mentioned in clauses (a) to (d) of sub-section (1) of section 151 are separately taxed at the rates provided in Division IIIA of Part I of the First Schedule.
Prior to the Finance Act, 2019, the rates were 10% where profit on debt was up to Rs.5 million, 15% where profit on debt was more than 5 million but not more than Rs.25 million and 15% where profit on debt exceeded Rs.25 million. Through the Finance Act, 2019, the rates of imposition of tax under section 7B mentioned in Division IIIA, Part I of the First Schedule have been enhanced as given hereunder:-
|Sr. #||Profit on debt||Rate of tax|
|1||Where profit on debt does not exceed Rs.5,000,000||15%|
|2||Where profit on debt exceeds Rs.5,000,000 but does not exceed Rs.25,000,000||17.5%|
|3||Where profit on debt exceeds Rs.25,000,000 but does not exceed Rs.36,000,000||20%”|
Where the profit on debt exceeds Rs.36 million in a tax year, section 7B will not be applicable and the profit on debt will not be separately taxed for persons other than companies.
In such cases, profit on debt will be chargeable to tax under the head, “Income from other sources” under section 39 and tax shall be imposed at the rates specified in paragraph (1) or (2), as the case may be, of Division I, Part I of the First Schedule.