Celebrate Freedom and save 20% OFF on CAclubindia Pro Subscription! Use code: FREEDOM20

Tax Implication of buying sovereign gold bond (SGB) from stock exchange

Irfan (Taxpayer) (23 Points)

06 January 2024

I am planning to invest in sovereign gold bond (SGB) and my query is below.

Lets say I buy SGB from stock exchange, for example If I buy a SGB (issued in 2020) from the stock exchange then it is already in its 4th year.

If I hold this till its maturity and then redeem, will I still be eligible for capital gains tax exemption?

In short will i receive capital gains tax exemption on redemption of an SGB if the same has been bought from stock exchange?

Reply
Follow
Share

2 Replies

Asha Kanta Sharma (Manager - Finance & Accounts) (36320 Points)
Replied 17 January 2024

As per my view, Selling SGBs in the secondary market before maturity attracts tax on capital gains. If you redeem SGB units before a holding of 3 years, it qualifies as short-term capital gains. However, SGB unit redemption exceeding 3 years is referred to as long-term capital gains.

While short-term gains are taxed based on your tax slab, long-term gains are taxed at approximately 20%, coupled with indexation benefits. So, understanding these key factors on tax implications is crucial before purchasing SGBs from the secondary market.