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 most important considerations for these SGB buyers particularly if earlier SGBs can be found at a reduced value than the present concern within the secondary market. Allow us to attempt to handle this on this submit.
Allow us to take an instance. The problem 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 value is Rs.6,149. Nevertheless, if you happen to have a look at the newest earlier concern “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 accessible at nearly round Rs.100 low cost if you happen to evaluate the December 2023 SGB.
Nevertheless, if somebody buys the SGB from a secondary market, then they’ve two huge considerations. Allow us to attempt to handle each on this submit.
# 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’ll get the curiosity as ordinary. Nevertheless, the two.5% curiosity will likely 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 in case you are shopping for it at Rs.6,000, then you’ll 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 problem value.
Take for the instance of the November 2023 concern Vs the December 2023 concern. The problem value of November 2023 was Rs.5,873 (on-line). Therefore, even whether it is accessible presently at Rs.6,100, you’ll get 2.5% curiosity on Rs.5,873 however not on Rs.6,100 (curiosity of Rs.146.82 per 12 months). Nevertheless, if you happen to purchase the December 2023 concern, the value is Rs.6,149 (on-line). Therefore, the curiosity you’ll earn is Rs.153.72 per unit per 12 months.
By trying on the value, don’t assume that the curiosity you earn sooner or later is predicated in your buy value. Nevertheless, to know your curiosity incomes, you must search for the problem value quite than the present market value.
Additionally, 2.5% curiosity is per 12 months however payable as soon as in half a 12 months. This half-year calculation isn’t based mostly on once you bought. As a substitute, it’s based mostly 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 Earnings-The semi-annual curiosity earnings will likely be taxable earnings 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 earnings you must present underneath the pinnacle of “Earnings from Different Sources” and need to pay the tax accordingly (precisely like your Financial institution FDs).
2) Redemption of Bond– After the fifth 12 months onward you’re eligible to redeem it on the sixth,seventh, and eighth 12 months (final 12 months). 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 resulting from redemption by a person is exempted from tax.
3) Promoting within the secondary market of the Inventory Trade-There may be yet one more taxation that will come up. Allow us to assume you purchase right this moment the Sovereign Gold Bond Scheme 2023-24 Sequence I and promote it on the inventory change after a 12 months or so. In such a scenario, any revenue or loss from such a transaction will likely be thought of 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 case you promote the bonds inside three years and if there may be any capital acquire, such capital acquire will likely be taxed as per your tax slab.
# After 3 years – In case you promote the bonds after 3 years however earlier than maturity, then such capital acquire will likely be taxed at 20% with indexation.
There isn’t any idea of TDS. Therefore, it’s the accountability of buyers to pay the tax as per the foundations 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 (Regardless of whether or not you bought it on the time of concern or from the secondary market).
I hope I’ve cleared the most important doubts of those that want to purchase sovereign gold bonds from the secondary market.
