Government has clarified that even existing investors in 8 per cent savings bonds 2003 must pay tax on interest exceeding Rs 10,000 in any financial year from June 1, 2007.

"TDS on these bonds is effective from June 1 2007. Any interest credited or paid on these bonds on or after this date will attract TDS if the amount of interest exceeds Rs 10,000 for the financial year", CBDT clarified.
As such the date of investment in these bonds is not a relevant factor, according to the clarifications posted on RBI website.

"TDS would thus apply to existing bond holders also", it added. While those not falling under the category of company would have to pay 20 per cent tax on interest earned from these bonds for a period between June 1, 2007 and March 3, 2008, the tax liability will b 10 per cent from April 1 2008.

However, a company would be paying 20 per cent tax in every financial year after June 2007.
Non-resident company would pay 40 per cent tax and the bond holder other than a company will shell out 30 per cent.