Indian Income Tax | Exempt Interest Income

Section 10(15)(i): Exemption for Interest and Redemption Premium on Notified Securities

Section 10(15)(i) of the Income-tax Act, 1961 provides an exemption for specified interest, premium on redemption, or other payments on securities, bonds, certificates and deposits that the Central Government has notified for this purpose. The exemption is instrument-specific: merely investing in a government security does not automatically make its interest tax-free.

Key point: Check the precise government notification, eligible holder, issue conditions and relevant tax year before treating investment income as exempt.

Meaning and scope of Section 10(15)(i)

Under this clause, interest, premium on redemption or other payment on securities, bonds, annuity certificates, savings certificates and other certificates issued by the Central Government, and on deposits in specified schemes, may be excluded from total income where the Central Government has notified the instrument and any applicable conditions in the Official Gazette. The exemption applies only to income and instruments within the statutory language and the relevant notification.

Eligible taxpayers and amount exempt

Question	Position under the provision
Who can claim?	A taxpayer who receives qualifying income and satisfies the notification's holder or investor restrictions, if any. It is not necessarily restricted to individual taxpayers.
Which income?	Specified interest, redemption premium or other qualifying payments on government-notified instruments or schemes.
How much is exempt?	The qualifying amount to the extent covered by the relevant notification and conditions. There is no universal exemption for all bonds or deposits.
What is not covered?	Interest from ordinary bank fixed deposits, most taxable bonds and other instruments without the required exemption notification.

Conditions for claiming the exemption

Identify the investment. Record its exact scheme or security name, issuer, issue date, series and investment certificate or account reference.
Verify the notification. Confirm that a Central Government notification under Section 10(15)(i) covers that instrument, and check amendments, withdrawal provisions or sunset dates.
Check investor eligibility. Certain notifications may limit benefits to particular investors, subscription periods, investment limits or holding conditions.
Separate exempt and taxable receipts. An exempt interest payment does not automatically make a sale gain, transfer gain or every other return on the investment exempt.
Keep records. Retain the notification, investment document, interest statement, redemption statement and relevant tax-return disclosures.

Notifications mentioned in earlier guidance

The original article referred to the following historical notification identifiers. They are retained here for research purposes, not as confirmation that each remains operative or applies to every investment today:

S.O. 607(E), dated 9 June 1989
S.O. 653(E), dated 31 August 1992
S.O. 844(E), dated 21 September 1998
S.O. 742(E), dated 27 June 2003
S.O. 1114(E), dated 10 August 2005
Notification No. 281/2004, F. No. 178/20/2004, dated 18 November 2004

Notification references should be checked against their original Gazette text, any corrigenda and subsequent amendments before relying on them. A historical citation by itself does not establish present eligibility.

Section 10(15)(i) compared with other interest exemptions

Section 10(15) contains several distinct sub-clauses governing different types of interest or investment income. Eligibility under one sub-clause should not be assumed under another. Likewise, a deduction for investing money under Chapter VI-A is legally different from an exemption for income earned on that investment.

For general background, see income exempt under Section 10, Chapter VI-A deductions and tax-saving investments and deductions.

Applicability of the Income-tax Act, 2025

This article explains the historical Section 10(15)(i) reference under the Income-tax Act, 1961. The Income-tax Act, 2025 applies from 1 April 2026, subject to its transitional and savings provisions. For tax years governed by the 2025 Act, consult its applicable exemption provisions and the corresponding rules and notifications rather than assuming the old section number continues unchanged.

Illustrative example

Suppose a taxpayer receives Rs. 12,000 in interest from a bond described by its issuer as tax-free. The taxpayer should verify that the specific bond series is covered by an applicable notification and that all investor and issue conditions are met. If the receipt qualifies, the relevant amount may be exempt. If the bond is not covered, its interest is generally taxable under the applicable provisions, notwithstanding the description used in promotional material.

Frequently asked questions

Is interest on every government bond exempt?

No. The instrument and receipt must fall within the applicable exemption provision and government notification.

Is a redemption premium treated the same as a capital gain?

Not necessarily. A notified redemption premium may be covered by the exemption, but gains from selling a bond or certificate are subject to separate characterization and tax rules.

Can a company claim the exemption?

The clause is not a blanket individual-only exemption. The particular notification may impose eligibility restrictions, so the taxpayer's status must be checked.

Where can the notifications be verified?

Use the official Gazette and Income Tax Department resources below, including amendments and corrigenda.

Official legal resources

Updated: 10 October 2026. General educational information; verify the instrument-specific notification and tax-year law before filing.