What are SGBs and how are they taxed?

Income Tax Income from Capital Gains
21

Hey. How does the taxation work for premature redemption of SGBs after five years?

Since premature redemption is not selling the SGBs in secondary markets, technically, it’s not taxable. Can anyone confirm this?

22

Hey @Aswath,

Premature redemption of SGBs is not taxable.

23

Purchasing investments does not impact taxation; taxation is determined only by selling, redeeming, or reaching maturity. Buying from the secondary market at any time and holding until maturity is tax-free.

24

Hi,

I recently acquired an SGB on the secondary market and have queries regarding potential tax liabilities. The bond in question is SGBMAY2025, with a one-year maturity period, purchased in April 2024. Here are my questions:

  1. Should I, as the buyer, anticipate being subject to capital gains tax on this secondary market SGB acquisition with a one-year maturity, during the maturity date?

  2. On which specific date in May will I receive the maturity amount?

  3. Upon maturity, do I need to undertake any actions, or will the funds be automatically credited to my bank account?

Thanks and regards,

Balakrishnan

25

Hey @bala_krishnan,

As the SGB will be redeemed on maturity, they will be exempted from taxes.

The RBI issues a notification where it announces new tranches for SGBs and also declares the redemption dates for previous trances. The redemption date will be announced by the RBI around that time.

In the case of most brokers, the funds will be credited to your account.

Hope this clarifies your query.

26

Team,

SGB’s held until maturity - is it ok to file ITR-1 or is ITR-2 mandatory. (Except for the SGB maturity, the rest is all ITR-1 only). Asking because in ITR-1 itself there is a section for Exempt Income → Nature of Income → Any other. But at the sametime wondering if it must be ITR-2 since it is a capital gain (although an exempt one)

27

Hey @Sam1,

As the SGBs were held till maturity, the income will be exempted from taxes. The same can be reported in schedule exempt income and ITR-1 can be filed.

1 Like
28

Mam Which Head is used to show Short term capital gain as per slab rate in SGB. Can we show in ITR 2 as Other Income (Income only from Equity Trading and short term profit from SGB)

29

The QnA post explains Sovereign Gold Bonds (SGBs), a government-backed investment alternative to physical gold. SGBs offer periodic interest and are a safer option compared to holding physical gold. In terms of taxation, the interest earned is taxable, while the capital gains from redemption after maturity are tax-exempt. However, selling SGBs before maturity might incur capital gains tax based on holding periods.