The second tranche of the Sovereign Gold Bonds (SGB) opened for subscription on August 22 and will close on August 26, 2022. SGBs are issued by the RBI at a predetermined issue price on behalf of the Indian government.
In addition to the potential benefit of rising gold prices, these bonds provide investors a fixed 2.5% interest rate on their investments. Semi-annual interest payments are made. Therefore, it is crucial that you know how your gains and interest income from gold bonds will be taxed.
Sovereign Gold Bond Scheme 2022-23 Series II details
The nominal value of the bond is equal to Rs 5,197 per gram of gold based on the simple average closing price [published by the India Bullion and Jewellers Association Ltd (IBJA)] for 999-purity gold for the last three working days of the week prior to the subscription period, which are August 17, August 18, and August 19, 2022. Investors who subscribe online and make payments digitally will receive a 50 rupee per gram discount on the issue price of SGBs.
The SGB has an eight-year tenor, with an option to redeem early after the fifth year on the date interest is due.
As per an Economic Times news report, long-term capital gains will be taxed at 20% with an indexation benefit if the SGB is redeemed after the lock-in period of 5 years but before the maturity period of 8 years. Interest earned on SGBs is taxable as income from other sources, whereas TDS does not apply to bonds.
Interest on SGBs is taxable under the provisions of the Income Tax Act of 1961. (43 of 1961). The tax on capital gains deriving from the redemption of SGB by an individual is free. Long-term capital gains deriving from the transfer of the SGB will be eligible for indexation advantages.