HomeLifestyleHow and how much tax is levied on Sovereign Gold Bonds, understand...

How and how much tax is levied on Sovereign Gold Bonds, understand full details from expert

Highlights

At least one gram of gold has to be invested in Sovereign Gold Bonds.
Any individual and Hindu Undivided Family can buy gold bonds up to a maximum value of 4 kg.
Sovereign Gold Bond has a maturity period of 8 years.

Mumbai. Sovereign Gold Bond is one of the various avenues of investment in gold. It is considered more secure than other investment avenues. It also gives an interest of 2.5 percent per annum. Sovereign Gold Bonds are government securities, issued by the central bank, RBI, on behalf of the government. These are sold to resident individuals, Hindu Undivided Families (HUFs), trusts, universities and charities.

At least one gram of gold has to be invested in Sovereign Gold Bonds. Any individual and Hindu Undivided Family can buy gold bonds up to a maximum value of 4 kg. The maximum purchase limit for trusts and similar entities is 20 kg.

tax math

Investors get a fixed interest every year on Sovereign Gold Bond (SGB). Its h rate has been fixed at 2.5 per cent per annum. This interest is taxable under the Income Tax Act, 1961. Interest earned from gold bonds in a financial year The interest earned on gold bonds is counted in the income of the taxpayer from other sources. Therefore, it is taxed on the basis of which income tax slab the taxpayer falls in. However, there is no TDS on the interest earned from gold bonds.

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Maturity period 8 years

Sovereign Gold Bond has a maturity period of 8 years. The return received by the customer after the completion of 8 years is completely tax free. This is a special tax benefit introduced by the government to make bonds more attractive and encourage more investors to shift from physical gold to non-physical gold.

There are two ways to prematurely exit from Sovereign Gold Bonds. Doing so attracts different tax rates on bond returns.

long term capital gains tax

First, the lock-in period of sovereign gold bonds is generally 5 years. The returns from the sale of gold bonds after the completion of this period and before the completion of the maturity period, are kept in the Long Term Capital Gains. Long term capital gains tax rate is 20 per cent with added cess and indexation benefits.

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When to sell gold bonds

Second, if gold bonds are listed on a stock exchange, they can be traded on the stock market from a date notified by the RBI. If the gold bond is sold within 3 years from the date of purchase, the return received will be treated as short term capital gains. This will be added to the annual income of the investor and will be taxed as per the applicable tax slab. On the other hand, if the gold bond is sold after completion of 3 years from the date of purchase, the returns received will be treated as long term capital gains and taxed at the rate of 20 per cent with added cess and indexation benefits.

Tags: gold business, Gold ETF, gold investment, Gold price, Sovereign gold bond

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