The introduction of tax deducted at source (TDS) on income from central government securities and state bonds may not lead to a significant effect on retail participation, according to market participants.

The Union Budget proposed that starting October 1, 2024, investors may face a 10 per cent TDS on investments in central government securities and state development loans (SDLs).

“Last Budget, TDS on interest on securities was reintroduced.

Similarly, we see very less impact of investors shying away from investing in government securities and SDL due to 10 per cent TDS on interest,” he added.

In the Union Budget for the previous financial year, a 10 per cent TDS was announced on interest payments.

It was applied to listed bonds (debentures) starting April 1 2023.

A segment of the market believes that retail investors, who often schedule their cash inflows based on anticipated interest earnings, may encounter disturbances due to TDS deductions.

This could particularly affect those relying on steady interest payments for their sustenance or other financial obligations.

They said that those investors may shift to other instruments to avoid an extra layer of complexity.