The interest that is earned on these bonds is taxable in the hands of the investor. This is an important part of the equation because the tax rate applicable here depends on the level of income of the individual.
The income would be classified as income from other sources. The figure would be a part of the total taxable income of the individual, so the applicable tax rate would be the marginal tax rate applicable to the taxpayer.
For example, if someone has adopted the new tax regime and they fall in the 10% tax bracket, then they would end up paying tax at this rate. On the other hand, if someone falls in the 30% tax bracket, then their rate would be this higher rate.