TDS calculation for zero coupon NCDs

QnA
1

hello, need some help here
I have a 0 coupon NCD (5-year term) that’s maturing this year, will TDS be applied on the full 5 years of interest? or only on the interest portion for this year? anyone who’s dealt with this before, please guide

2

Hi Laukik.

For listed zero coupon NCDs, the return you earn over the entire period is treated as a capital gain, not interest.

Because of that:
TDS is NOT deducted on maturity for listed zero-coupon NCDs.

Instead, you pay tax based on:

  • Short-term capital gains (if held < 12 months)

  • Long-term capital gains (if held ≥ 12 months)

Since you’ve held it for 5 years, it falls under long-term capital gains rules.

So to answer your question directly:
TDS will not be deducted on the combined 5-year gain or on this year’s gain, because listed ZCBs don’t attract TDS.

If you need help understanding how LTCG is calculated for ZCBs, feel free to ask here.