There is no tax to be paid if you invest up to five lakh rupees in savings certificates. When you go to withdraw the profit from savings bonds, no tax will be deducted at source from your profit.
This provision has been placed in the tax at source section of the new Income Tax Act. It is said that this provision has been added in the draft law to protect the middle class. If the law is passed by the parliament, the small savers who invest up to five lakh rupees will get the entire amount of profit. The draft of the new income tax law was approved in the cabinet meeting last Monday.
As per the existing rules, there is a provision to deduct income tax at source at the rate of 10 per cent on the profits of savings certificates if they have a Tax Identification Number (TIN) and 15 per cent if they do not have a TIN. A notification issued two years ago exempted tax at source on investments up to five lakh rupees in savings certificates. The facility has been continued in the new law.