Debentures can be redeemed out of the existing share capital reserve or the existing general reserve.
Redemption refers to the process of repaying the debenture holders at the maturity of the debentures. The company can use its profits or reserves to redeem the debentures. When the debentures are redeemed, the company repays the principal amount along with any interest due to the debenture holders.
Existing share capital reserve is a reserve created out of the profits earned by the company from the issue of shares. The reserve can be used for the redemption of debentures. Similarly, the existing general reserve is a reserve created out of the company's profits, and it can also be used for the redemption of debentures.
Proceeds from a new issue of shares are not used for the redemption of debentures. Instead, the proceeds are used for financing new projects or expansion plans of the company.
Withholding tax is a tax deducted at source from the interest payments made to the debenture holders. It is not used for the redemption of debentures.
In summary, debentures can be redeemed out of the existing share capital reserve or the existing general reserve. These reserves are created out of the profits earned by the company, and they can be used for the repayment of the debenture holders at the maturity of the debentures.