How are Sovereign Gold Bonds (SGBs) taxed for Series IV FY24? Details are available here

How are Sovereign Gold Bonds (SGBs) taxed for Series IV FY24? Details are available here

Government securities known as Sovereign Gold Bonds, or SGBs, are a secure way to invest. In December 2023, the issue price for the current tranche was Rs 6,199 per gram; it is now fixed at Rs 6,263 per gram.

The last tranche of Sovereign Gold Bond (SGB) subscriptions for the fiscal year 2023–2024 is scheduled to begin on February 12 and end on February 16. The current tranche's issuance price is fixed at Rs 6,263 per gram. December 2023 will see the third payment, at Rs 6,199 per gram.

Government securities known as Sovereign Gold Bonds, or SGBs, are a secure way to invest. The amount of gold that they are worth is determined in grams. SGBs are becoming more and more well-liked among investors as a substitute for actual gold. These bonds are a good choice for anyone who want to earn tax-free profits since they have beaten both actual gold and gold exchange-traded funds (ETFs).

The subscription period for the last tranche, the Sovereign Gold Bond Series 2023–24 Series III, commenced on December 18 and ended on December 22, 2023. SGB Series III was issued on December 28, 2023. Two additional installments were issued prior to this. September 2023 and June 2023.

Date of Tranche Subscription; Date of Issue; Price of Issue 2023–24 Series I June 19–23, 2023–June 27, 2023, Rs. 5,926/gramSeptember 11–September 15, 2023 September 20, 2023 Rs 5,923 per gram 2023–24 Series IIDecember 18–December 22, 2023 December 28, 2023 Rs 6,199 per gram 2023–24 Series IIISeries IV 2023–2024 2024; February 12–February 16, February 21, 2024: A gram is worth Rs 6,213

Purchasers of SGB have many options. SGBs will be offered for sale via designated post offices, approved stock exchanges (National Stock Exchange of India Limited and Bombay Stock Exchange Limited), Stock Holding Corporation of India Limited (SHCIL), and Clearing Corporation of India Limited (CCIL). An agent or broker with SEBI authorization is another option.

What taxes apply to SGBs?

One gram is the fundamental unit of measurement for SGBs, which are issued in multiples of grams of gold. Investors may choose to take early withdrawals from the SGB after the fifth year, which occurs on the interest payment day. The SGB has an eight-year lifespan.

The IT Act of 1961's regulations apply to the taxes of interest received on Sovereign Gold Bonds. Nonetheless, there is no capital gains tax due when an individual cashs in SGB. Whether or not investors decide to assign the bond to another individual, they also profit from indexation on long-term capital gains.

The introduction of the Sovereign Gold Bond (SGB) program served as a substitute for actual gold. Investors purchase these bonds upon the scheme's inception and redeem them upon maturity. SGBs usually need eight years to mature. Its maturity term is Rs. 5000, and at the start of the fifth year, there are exit possibilities. Investors get tax advantages when they redeem gold bonds via the SGB method. But if investors use the secondary market to redeem their SGBs Investors will pay capital gains tax at the going rate of the market if they sell in the United States. Like regular interest income, the interest generated on SGBs is subject to taxation at the individual's appropriate tax rate. Furthermore, SGB would be provided to investors who subscribe via digital and online payment channels at a discount of Rs 50 per gram off the issuance price, according to GoldenPy CEO Abhijeet Roy.

There are two categories of returns on sovereign gold bonds: semi-annual interest income and capital gains realized upon bond maturity. Investors get payments twice a year at a set interest rate of 2.5 percent, which is determined by the face amount of their investment. Because of this, each payment has an effective interest rate of 1.25%, and the amount is taxable based on the investor's income tax bracket.

Investors are not subject to long-term capital gains tax if they retain the bonds for the whole eight-year period. Periodic interest income, however, is taxable under the heading of "Income from other sources" and is levied in accordance with the Central Government's established income tax slabs.

In contrast to Gold ETFs, SGBs provide a guaranteed 2.5% annual interest income over eight years, which boosts total returns and serves as a reliable source of income. The capital gains tax exemption at maturity is a significant advantage that may increase SGB holders' post-tax earnings. Roy said that "even greater security is provided by the government guarantee on the original investment, potentially outperforming gold exchange-traded funds."

In the event of a resale, investors must claim short-term capital gains on the whole profit in accordance with their yearly income if they choose to sell the bonds before the three-year period has passed. In contrast, long-term capital gains will be subject to taxation at a rate equal to 20% of total earnings after indexation.