Sovereign Gold Bonds (SGB) has become a secure investment instrument for risk-averse investors. But understanding the taxability has become a daunting task for investors in the retail segment. Investors are found exploring answers to questions related to Sovereign Gold Bonds. The frequent questions include - Is the Sovereign Gold Bond taxable? What percent of the tax is charged? Does Sovereign Gold Bond attract TDS? Is the maturity tax-free?
Delhi, India -- (SBWIRE) -- 09/12/2022 -- The Experts at BondsIndia speak about how much and how Sovereign Gold Bonds are Taxed. You can get answers to all your questions here.
Understanding Sovereign Gold Bond Tax Calculations
The investors earn a fixed 2.5% annual interest on Sovereign Gold Bond (SGB). This interest income that is earned is taxable under the Income Tax Act, 1961. Thus, this is the answer to your question - Is the Sovereign Gold Bond taxable?
There are no TDS applicable on the interest you earn from your capital in gold bonds answers your question - Does Sovereign Gold Bond attract TDS? The investor while filing returns is required to declare this income and pay advance tax accordingly.
What percent of the tax is charged?
The interest that you earn from your investment in gold bonds in a fiscal year is counted under the category, of the income of the taxpayer from other sources. It is therefore taxed based on the tax slab rate the investor falls in. Customers falling in the tax bracket of 30%, end up paying the peak tax on the earned interest on Sovereign Gold Bonds.
The capital gains tax
"Sovereign gold bonds have a maturity period of 8 years, and the lock-in period is 5 years. The returns you gain post selling the SGB after completing the lock-in period and prior to completion of the maturity period comes under the Long-Term Capital Gains. The long-term capital gains attract a tax rate of 20% along with added cess and indexation benefits", said Mr. Ankit Gupta, Founder, BondsIndia.
The capital gains will be taxable in both these cases. First, when in Sovereign gold bonds there is the short-term capital gain (STCG) i.e., the sovereign gold bond is sold in a period less than 3 years from the date of purchase. Second, long-term capital gains (LTCG) if it is sold after holding it for more than 3 years. In the case of STCG, the tax on capital gains will be payable at the peak rate. On the other hand, the investor in the case of LTCG can choose to pay a flat rate of 10% tax or 20% post taking into consideration the benefit of indexation.
Sovereign Gold Bond Maturity - 8 years
The return you receive after the completion of an 8-year maturity period is completely tax-free. The Indian government has introduced this special tax benefit to make Sovereign Gold Bonds more attractive. It also aims at encouraging a greater number of investors to shift from physical gold to Sovereign Gold Bonds.
Sovereign Gold Bonds has emerged as one of the preferred investment options. Buying SGBs thus can prove to be an ideal choice.
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