Sovereign Gold Bond: Check tax implications on interest, maturity and premature capital gains

If you are looking for safe investment options, investing in Sovereign Gold Bonds (SGBs) can be a good choice. These gold bonds not only offer 2.5 percent annual interest to the investors, but are also a substitute for holding physical gold. The interest received on the investment is added to an investor’s total income and is taxed accordingly. While the period of investment in SGB is eight years, the Reserve Bank of India (RBI) also gives the opportunity of premature redemption to the investors. They can redeem their gold bonds five years from the date of issue. According to the Reserve Bank of India (RBI), the interest earned on the bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). The RBI further added that an individual is exempted from capital gains tax arising on redemption of gold bonds. “The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond,” the RBI has said. Tax Deducted at Source (TDS) is not applicable on the bond, but it is the bond holder’s responsibility to comply with the tax laws. However, these rules are valid only if the bonds are kept till maturity. What is the taxation on premature redemption of SGBs? Apart from redeeming these bonds five years from the issue date, investors can also transfer them in the secondary market. The bonds can be listed on the stock markets six months after the date of issue. Gains on the transfer of SGB via a stock exchange within three years from the date of investment are called short-term capital gains and are taxed after being added to the investors’ total income. Gains on the transfer of SGB through a stock exchange on or after a period of three years from the investment date are considered to be long-term capital gains. Such long-term capital gains may be taxed either at a 20 percent rate post indexation or at 10 percent rate without indexation. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.