Is Sovereign Gold Bond Tax-Free if purchased from secondary market?

Is SGB or Sovereign Gold Bond Tax-Free if purchased from a secondary market? Will I get curiosity if I purchase Sovereign Gold Bond from the secondary market?

The above two questions are the largest issues for these SGB traders particularly if earlier SGBs can be found at a reduced value than the present subject within the secondary market. Allow us to attempt to handle this on this publish.

Allow us to take an instance. The difficulty value for the newest SGB (“Sovereign Gold Bond Scheme 2023-24 Sequence 3 – Ought to You Purchase?” is Rs.6,199 and if you happen to purchase it on-line, then the worth is Rs.6,149. Nevertheless, if you happen to take a look at the newest earlier subject “Sovereign Gold Bond Scheme 2023-24 Sequence 2 – Ought to You Purchase?“, then it’s buying and selling presently at Rs.6,100 (NSE Information). So the Oct 2023 SGB is offered at nearly round Rs.100 low cost if you happen to examine the December 2023 SGB.

Nevertheless, if somebody buys the SGB from a secondary market, then they’ve two massive issues. Allow us to attempt to handle each on this publish.

# Will I get curiosity if I purchase Sovereign Gold Bond from the secondary market?

Sure, if you happen to purchase Sovereign Gold Bond from the secondary market, then you’re going to get the curiosity as normal. Nevertheless, the two.5% curiosity will probably be on the unique issued value of SGB however not at your bought value. Suppose the SGB was issued at say Rs.5,000 and now if you’re shopping for it at Rs.6,000, then you’re going to get the two.5% curiosity on Rs.5,000 however not on Rs.6,000. The identical applies even when the present value goes down than the difficulty value.

Take for the instance of the November 2023 subject Vs the December 2023 subject. The difficulty value of November 2023 was Rs.5,873 (on-line). Therefore, even whether it is accessible presently at Rs.6,100, you’re going to get 2.5% curiosity on Rs.5,873 however not on Rs.6,100 (curiosity of Rs.146.82 per yr). Nevertheless, if you happen to purchase the December 2023 subject, the worth is Rs.6,149 (on-line). Therefore, the curiosity you’ll earn is Rs.153.72 per unit per yr.

By trying on the value, don’t assume that the curiosity you earn sooner or later is predicated in your buy value. Nevertheless, to grasp your curiosity incomes, you need to search for the difficulty value quite than the present market value.

Additionally, 2.5% curiosity is per yr however payable as soon as in half a yr. This half-year calculation shouldn’t be primarily based on while you bought. As a substitute, it’s primarily based on the unique issued date of the bond.

# Is Sovereign Gold Bond Tax-Free if purchased from secondary market?

Allow us to now attempt to handle this query “Is Sovereign Gold Bond Tax-Free if purchased from secondary market?”. Earlier than immediately answering this query, allow us to attempt to perceive the taxation of Sovereign Gold Bond in totality.

There are three points of taxation. Allow us to see one after the other.

1) Curiosity Revenue-The semi-annual curiosity revenue will probably be taxable revenue for you. Therefore, For somebody within the 10%, 20%, or 30% tax bracket, the post-tax return involves 2.25%, 2%, and 1.75% respectively. This revenue you need to present below the top of “Revenue from Different Sources” and must pay the tax accordingly (precisely like your Financial institution FDs).

2) Redemption of Bond– After the fifth yr onward you’re eligible to redeem it on the sixth,seventh, and eighth yr (final yr). Allow us to assume on the time of funding, the bond value is Rs.2,500 and on the time of redemption, the bond value is Rs.3,000. Then you’ll find yourself with a revenue of Rs.500. Such capital acquire arising as a result of redemption by a person is exempted from tax.

3) Promoting within the secondary market of the Inventory Alternate-There’s yet one more taxation which will come up. Allow us to assume you purchase at the moment the Sovereign Gold Bond Scheme 2023-24 Sequence I and promote it on the inventory alternate after a yr or so. In such a scenario, any revenue or loss from such a transaction will probably be thought-about as a capital acquire.

Therefore, if these bonds are bought within the secondary market earlier than maturity, then there are two prospects.

# Earlier than 3 years-In the event you promote the bonds inside three years and if there may be any capital acquire, such capital acquire will probably be taxed as per your tax slab.

# After 3 years – In the event you promote the bonds after 3 years however earlier than maturity, then such capital acquire will probably be taxed at 20% with indexation.

There isn’t any idea of TDS. Therefore, it’s the accountability of traders to pay the tax as per the principles talked about above.

It’s clear from the above guidelines that IF YOU SELL SOVEREIGN GOLD BOND IN THE SECONDARY MARKET, THEN AS PER THE APPLICABLE ABOVE MENTIONED CAPITAL GAIN RULES, YOU HAVE TO PAY THE TAX.

HOWEVER, IF YOU BUY SOVEREIGN GOLD BOND FROM THE SECONDARY MARKET BUT INSTEAD OF SELLING IN THE SECONDARY MARKET, YOU ARE REDEEMING AT THE 6TH, 7TH, OR 8TH YEAR OF ISSUED PRICE, THEN IT IS TAX FREE FOR YOU (Irrespective of whether or not you bought it on the time of subject or from the secondary market).

I hope I’ve cleared the main doubts of those that want to purchase sovereign gold bonds from the secondary market.

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