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?
Hey @Aswath,
Premature redemption of SGBs is not taxable.
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.
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:
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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?
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On which specific date in May will I receive the maturity amount?
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Upon maturity, do I need to undertake any actions, or will the funds be automatically credited to my bank account?
Thanks and regards,
Balakrishnan
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.
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)
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.
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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)
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.
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I have below queries:
- If I am holding SGB purchased from secondary market which has already passed 5 years from the issue date, how can I surrender it directly to the government?
- If I am holding SGB purchased from secondary market within a year and it is surrendered to the government after 5/8 years from the issue date, how the tax will be calculated?
Hello @Shiv_Katira ,
Once an SGB completes 5 years from its issue date, the RBI opens a buy-back window where you can redeem it. If you hold it till 8 years, the RBI automatically redeems it on maturity.
In both cases—whether you redeem after 5 years through RBI’s buy-back option or at 8 years on maturity—the gains are completely tax-free (exempt from income tax).
However, if you choose to sell the SGB in the secondary market, it will be treated as a capital gains transaction and taxed accordingly.
Hope this helps.
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@Sakshi_Jain thnx for the answer. But my question is how the taxation would work if I buy the SGB from secondary market, hold it for less than a year/more than a year and get it redeemed after 5/8 years.
If you are getting it redeemed through RBI after 5/8 years then it will be tax-free even if you have bought from secondary market.
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@Sakshi_Jain oh, so actual holding period doesn’t matter in this case (purchased from secondary market and redeemed through RBI.) Great!