Sovereign gold bonds and taxation. Are they taxable or not?

Sovereign gold bonds (SGBs) are government-issued bonds that can be a substitute for holding physical gold. The SGBs are issued by the Reserve Bank of India on behalf of the Government of India. SBGs are investment vehicles that allow investors to not only hold gold but also earn safe returns. The RBI has opened up the Sovereign Gold Bond (SGB) scheme for subscription once more from 22 to 26 August. The issuance of the bond will take place on 30 August. SBGs can be bid on through online banking portals and through forms available at banks. SBGs offer a 2.5 percent annual return in the form of interest that is paid out semi-annually. SBGs are priced based on the prevailing price of 999 purity gold. These prices are published by the India Bullion and Jewellers Association. The prices are determined by the average price during the last three days. The tenor of the bond is eight-year long though premature withdrawal is allowed after just five years. The bond is marked in the denomination of weight, with the minimum investment being 1 gram and the maximum being 4 kg for an individual. One of the most attractive features of SBGs is the fact that upon redemption of the bond, the amount is exempted from long-term capital gains tax. Though this exemption doesn’t apply in the term of premature withdrawal. The interest earned on these bonds, however, is taxable. SBGs can also be traded like other assets on stock exchanges. SBGs traded in such a way attract the respective capital gains tax depending on the term period of holding the bonds. Additionally, SBGs can be used to secure loans as well. “These securities are eligible to be used as collateral for loans from banks, financial Institutions and Non-Banking Financial Companies (NBFC),” the central bank has stated in its FAQ on SBG. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.