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.