Taxes pertaining to Sovereign Gold Bonds
Posted on: 09/Sep/2019 11:52:51 AM
Gold bond holdings enable earn an interest of 2.5%. Note that this revenue is entirely taxable.
If you are in the 30% tax bracket, you have to pay the peak tax on your interest receipt.
Please note that there is no TDS (Income Tax Deducted at Source) on interest paid out. As such, you need to show this income while filing returns and pay advance tax accordingly.
As for the aspect of capital gains, sovereign Gold Bonds are redeemed at the end of 8 years. Note that any capital gains arising at the time of redemption will be entirely tax-free. The government offers this special tax benefit to make the tax bonds more attractive and encourage more investors to shift from physical gold to non-physical gold.
At the same time, please also note that the tax treatment is not so favourable if you exit the gold bonds earlier than that.
There are 2 ways to exit your bonds earlier :
- You can use the early redemption window that opens at the end of 5 years where you can redeem your gold bonds
- The second option is to sell your gold bonds in the secondary market.
All gold bonds issued will list on the stock exchanges with a unique ISIN on completion of 6 months from the date of the issue. In both the above cases, the capital gains will be taxable. Thus, the normal taxation definition of STCG (if less than 3 years) and LTCG (if more than 3 years) will become applicable. The tax on capital gains will be payable at the peak rate in case of STCG. In the case of LTCG, the investor can opt to pay tax at a flat rate of 10% or he can pay at 20% after considering the benefit of indexation.
Note that Sovereign Gold Bonds (SGB) have emerged as an interesting investment option in recent years. Buying gold bonds in India may finally be emerging as a lucrative investment option.
To get the latest Gold/Silver price visit : Gold rate in Chennai
