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Investors of 2018 GOI Savings Bonds face tax issues as RBI deducted TDS on full interest at maturity. Expert suggests using Form 71 to distribute TDS credit.
TDS on full GOI bond interest in one year: How investors can avoid tax mismatch
Investors who held Government of India (GOI) Savings Bonds issued in 2018 may face a tax complication when the bonds mature. Many investors reported the interest income annually on an accrual basis in their Income Tax Returns (ITRs), but when the bonds matured, the Reserve Bank of India (RBI) deducted Tax Deducted at Source (TDS) on the entire interest for the full tenure. This can create a situation where the same income appears taxed twice.
Why the issue arises
The 7.75% GOI Savings Bonds issued in 2018 paid interest annually, but in some cases investors chose to declare interest income each year using the accrual method in their ITRs. However, since the interest was not reflected in Form 26AS during those years, the TDS was deducted only at the time of maturity.
As a result, the entire interest for the seven-year period appears as income in the financial year of maturity, even though the taxpayer may have already paid tax on that income in earlier years.
Risk of tax mismatch
According to Amit Maheshwari, Tax Partner at AKM Global, claiming the entire TDS credit in the year of maturity without reporting the corresponding income could create problems.
“A discrepancy arises with past income tax returns where the income was already offered to tax on an accrual basis,” Maheshwari told Economic Times. He explained that claiming full TDS credit in FY 2025–26 without reporting the income in the same year may cause the return to be flagged as defective or trigger scrutiny from tax authorities.
How Form 71 helps
To resolve such situations, the Central Board of Direct Taxes (CBDT) allows taxpayers to use Form 71.
Maheshwari said taxpayers can file Form 71 to distribute the TDS credit across the assessment years in which the interest income was originally reported. This helps align the TDS credit with the income already declared in earlier returns and prevents double taxation.
The form must be filed electronically on the Income Tax portal within two years from the end of the financial year in which the TDS was deducted, before the Jurisdictional Assessing Officer.
Keep supporting documents ready
Experts advise taxpayers to maintain proper records to justify their claim. This includes a detailed year-wise working of accrued interest along with copies of the relevant ITR acknowledgments where the income was reported.
Maintaining such documentation will help taxpayers explain the mismatch and avoid unnecessary tax disputes.
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March 06, 2026, 07:00 IST
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