The decision to deduct tax at source from the financial year 2007-08 in respect of the Government of India Savings Bonds if interest during a year exceeds Rs 10,000 is a big blow to many retired persons who have invested substantially in these bonds.
To avoid deduction of tax at source, one has to submit form 15G/15H declaring that one has nil tax liability during the year.
However, there are many people whose tax liability is not nil but only a meagre amount.
For such persons, tax will be deducted at source in respect of the above bonds and they will have to claim refund from the income tax department.
When the above scheme was started, it was promised that no tax would be deducted at source.
Now, the government is going back on its promise. Since the investment is locked for six years, the depositors are helpless.
The Government should at least allow premature encashment of the bonds.