interest tax math
Investors get a fixed interest every year on Sovereign Gold Bond (SGB). The rate of interest has been fixed at 2.5 per cent per annum. This interest is taxable under the Income Tax Act, 1961. Interest earned from gold bonds in a financial year The interest earned on gold bonds is counted in the income of the taxpayer from other sources. Therefore, it is taxed on the basis of which income tax slab the taxpayer falls in. However, there is no TDS on the interest earned from gold bonds.
tax on maturity
Sovereign Gold Bond has a maturity period of 8 years. The returns received by the customer after the completion of 8 years are completely tax free. This is a special tax benefit introduced by the government to make bonds more attractive and encourage more investors to shift from physical gold to non-physical gold.
How much tax if redeemed before maturity period
There are two ways of premature exit from Sovereign Gold Bond. Doing so attracts different tax rates on bond returns.
1. Generally, the lock-in period of Sovereign Gold Bond is 5 years. The returns from the sale of gold bonds after the completion of this period and before the completion of the maturity period, are kept in long term capital gains. Long term capital gains tax rate is 20 per cent with added cess and indexation benefits.
2. If Gold Bonds are listed on the stock exchange, they can be traded on the stock exchange from the date notified by RBI. If the gold bond is sold within 3 years from the date of purchase, the return received will be treated as short term capital gains. This will be added to the annual income of the investor and will be taxed as per the applicable tax slab. On the other hand, if the gold bond is sold after completion of 3 years from the date of purchase, the returns received will be treated as long term capital gains and taxed at the rate of 20 per cent with added cess and indexation benefits.
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