Taxation on Sovereign Gold Bonds

• Those investing in Sovereign Gold Bonds receive fixed interest income at 2.5% p.a. in every 6 months (semi-annually). This interest income is added to your total income for the year and is taxed as per the investor’s income tax slab rate. For instance, if the investor’s income falls under the 30% income tax bracket, the interest earned on SGB would be taxed at 30%.
• As there is no TDS (Tax Deducted at Source) on the interest income, investors will have to disclose it under the section ‘Income from Other Sources’ when filing their income tax returns to stay compliant.

• If an investor sells his/her SGB holdings before its maturity date, i.e., before completing 8 years from the date of issuance, the investor will have to pay taxes on capital gains. Capital gains is the profit an investor makes on selling a capital asset, which in this case is SGB holdings. These gains are subject to taxation, depending on its period of holding.
• SGBs held for a period of less than a year would be considered Short-Term Capital Gains (STCG) and if held for a period of more than a year would be considered Long-Term Capital Gains (LTCG).
• Short-Term Capital Gains will be taxed as per the investor’s tax slab rates.
• Long-Term Capital Gains will be taxed at 12.5% without indexation.

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• Investors receive fixed interest payments at 2.5% p.a. every 6 months.
• No extra cost is involved in buying or holding these bonds.
• The issue and the redemption price of SGBs are linked to the prevailing gold market price, as published by the India Bullion and Jewellers Association Limited (IBJA), thereby, ensuring fair valuation.
• It can be pledged as collateral for availing loans from banks and NBFCs.
• Holding SGBs till its maturity date will exempt capital gains from taxation, thereby, enhancing the overall post-tax returns for individuals.
• The bond value moves with the movement of gold price, thus, there is potential for capital appreciation on maturity or on early redemption.

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