Government bonds and SDLs: Interest credited to the bank account is considered income from other sources and taxes have to be paid as per income tax slab. Appreciation in bond prices is considered capital gains, and long term capital gains (LTCG) is 10% flat. Short term capital gains (STCG) are as per the applicable slab rate. There is no tax-deducted-at-source (TDS) for the interest payments received on Government bonds
T-bills: T-bills are bought at a discount and sold at par. The appreciation is considered as STCG and taxed as per the applicable slab rate.