Sovereign Gold Bond Taxation: Sovereign Gold Bond has emerged as a popular means of safe investment and returns, but the income from it is not completely tax-free…
Sovereign gold bonds have become increasingly popular among a category of investors. Many things make it attractive for investors. The most important among them is the guarantee of security on investment as well as guarantee of returns. Since Sovereign Gold Bonds are backed by the government and issued by the Reserve Bank, investors are guaranteed that there is no risk to their investment.
income tax multiplication
Sovereign Gold Bonds have also proven to be better in terms of earning and have outperformed many other equivalent options like bank FDs. With this, investors not only get the benefit of the rising price of gold, but also get the benefit of interest on the invested amount. Seen this way, Sovereign Gold Bond is proving to be a double earning deal for investors. However, the income earned from this is not completely tax-free. Today we are going to explain to you the arithmetic of income tax on the income from Sovereign Gold Bond.
Benefits of Sovereign Gold Bond
Sovereign Gold Bond gives an interest of 2.5 percent annually along with capital appreciation. This is available every 6 months. Capital appreciation means that as the price of gold increases, the value of your investment also increases. There is no worry of theft or loss. Sovereign gold bonds can be held in the same way as shares are held in a demat account. This means there is no special hassle regarding maintenance.
Income tax on interest income
Talking about income tax on the income earned from this, the 2.5 percent interest received in Sovereign Gold Bond is taxable. This earning is added to the basic income of the income taxpayer. After that, the tax liability is calculated according to the income tax slab in which the total income falls. Meaning the interest income from Sovereign Gold Bond is taxable.
Short/Long Term Capital Gains Tax
The second income from Sovereign Gold Bond occurs when the investor redeems it. On selling Sovereign Gold Bond, the subscriber has to pay capital gains tax. Depending on the holding period, i.e. for how long you kept the gold bond with you, short term capital gains or long term capital gains tax is payable. Short term capital gains tax is applicable on holding period less than 1 year. If it exceeds one year, long term capital gains tax has to be paid.
Tax will not be charged in this case
The income from Sovereign Gold Bond also becomes tax-free in one case. If you hold the Sovereign Gold Bond till maturity, then you will not have to pay income tax on the income earned at that time. The maturity of Sovereign Gold Bond is in 8 years. That means, if you hold SGB for 8 years then there will be no income tax liability on the maturity account.
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