How are zero coupon bonds taxed

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Zero Coupon Bonds

Tata Motors DVR. Market Watch. Pinterest Reddit. In , I made long-term capital gains of Rs 6. What will be my income tax liability for ? Ashok Shah Partner, N.

Shah Associates replies: Being a super senior citizen , you are liable to pay income tax only if your taxable income exceeds Rs 5 lakh. Further, tax-exempt zero coupon municipal bonds earn interest that, in many cases, is also free from state and local taxes.


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Certain out-of-state municipal bonds may be taxable at the state level. Check with your tax attorney or advisor.

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In contrast, taxable zero coupon bonds are taxed each year on the amount of interest that has accrued for that year even though the accrued interest is not actually paid to investors in that year. Because they are sold at a substantial discount from face amount, you can purchase more zero coupon bonds for your money than other types of bonds.

The greater the number of years a zero coupon bond has until maturity, the less you have to pay for it. As a result, the zero coupon bond investor is able to buy and sell directly. Every one of David Lerner Associates investment counselors is extensively trained in municipal bonds.

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We stand ready to help you choose the municipal bonds that are best suited for your investment portfolio. Our investment counselors will help guide you through the array of investment choices, designing a personal investment strategy that meets your individual needs and goals. Zero Coupon Municipal Bonds. They are not, however, suitable for Individual Retirement Accounts IRAs or qualified pension plans, because these plans already have tax-advantaged status.