Government Securities (G-secs) issued by the Government of India pay interest (coupon) at fixed intervals. Investors often have questions regarding how the interest is credited, eligibility criteria, taxation, and what to do if the interest does not reflect in their bank account.

Frequency of Interest Payment

Most Government of India dated securities pay a fixed coupon on their face value.

• Interest is paid semi-annually (twice a year).
• The coupon rate (for example, 7.18%) is applied to the face value of the security (generally ₹100).
• Interest payments are processed by the Reserve Bank of India (RBI) on the scheduled coupon payment date.

How Interest Is Credited?

• The interest amount is directly credited to the investor’s primary bank account linked to the Demat Account
• RBI distributes the coupon, and the credit usually appears in the bank account on the same day.
• If the coupon date falls on a non-working day, the credit is processed on the next working day.

Eligibility to Receive the Interest (Mandatory Cut-off Rule)

RBI defines a specific eligibility window for coupon payments.

• To receive the upcoming interest, an investor must hold the G-sec at least 15 days before the coupon payment date.
• Purchases made inside this 15-day window will not be eligible for the upcoming coupon.
• In such cases, the interest is paid to the previous holder. The new holder becomes eligible from the next interest cycle.

Tax Treatment of G-sec Interest

• No TDS is deducted on interest from Government Securities.
• Coupon payments are fully taxable as per the investor’s income-tax slab.
• Such interest must be reported under “Income from Other Sources” in the income tax return.

Example of Interest Calculation

If a Government Security has:

• Face Value: ₹100
• Coupon Rate: 7%
• Payment Frequency: Semi-annual

Then:
Interest paid per cycle = ₹100 × 7% ÷ 2 = ₹3.50 per unit

This amount is credited directly to the registered bank account.

If Interest Is Not Credited

If the interest does not reflect in the bank account on the scheduled date:

1. Confirm that the G-sec was held before the 15-day eligibility cut-off.
2. Ensure that the bank account linked to your demat account is active and correctly updated.

Summary

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