In India, the tax on income from deep discount bonds can arise in two ways: In New Zealandbonds are stripped first into two pieces—the coupons and the principal. To help explain one, let's first describe a bond.
A strip bond is a bond where both the principal and regular coupon payments--which have been removed--are sold separately. Partner Links. Investment banks or dealers may separate coupons from the principal of coupon bonds, which is known as the residue, so that different investors may receive the principal and each of the coupon payments.