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 considerations 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 tackle this on this submit.
Allow us to take an instance. The difficulty value for the newest SGB (“Sovereign Gold Bond Scheme 2023-24 Collection 3 – Ought to You Purchase?” is Rs.6,199 and should you purchase it on-line, then the value is Rs.6,149. Nonetheless, should you take a look at the newest earlier subject “Sovereign Gold Bond Scheme 2023-24 Collection 2 – Ought to You Purchase?“, then it’s buying and selling at the moment at Rs.6,100 (NSE Information). So the Oct 2023 SGB is offered at virtually round Rs.100 low cost should you evaluate the December 2023 SGB.
Nonetheless, if somebody buys the SGB from a secondary market, then they’ve two massive considerations. Allow us to attempt to tackle each on this submit.
# Will I get curiosity if I purchase Sovereign Gold Bond from the secondary market?
Sure, should you purchase Sovereign Gold Bond from the secondary market, then you’ll get the curiosity as traditional. Nonetheless, 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’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 subject Vs the December 2023 subject. The difficulty value of November 2023 was Rs.5,873 (on-line). Therefore, even whether it is out there at the moment 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 yr). Nonetheless, should you purchase the December 2023 subject, the value is Rs.6,149 (on-line). Therefore, the curiosity you’ll earn is Rs.153.72 per unit per yr.
By wanting on the value, don’t assume that the curiosity you earn sooner or later relies in your buy value. Nonetheless, to grasp your curiosity incomes, you must search for the problem value slightly 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 is just not primarily based on whenever 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 tackle this query “Is Sovereign Gold Bond Tax-Free if purchased from secondary market?”. Earlier than instantly answering this query, allow us to attempt to perceive the taxation of Sovereign Gold Bond in totality.
There are three elements of taxation. Allow us to see one after the other.
1) Curiosity Revenue-The semi-annual curiosity earnings will probably 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 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 might be 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 achieve arising resulting from redemption by a person is exempted from tax.
3) Promoting within the secondary market of the Inventory Alternate-There’s yet another taxation that will come up. Allow us to assume you purchase in the present day the Sovereign Gold Bond Scheme 2023-24 Collection I and promote it on the inventory trade after a yr or so. In such a state of affairs, any revenue or loss from such a transaction will probably be thought-about as a capital achieve.
Therefore, if these bonds are bought within the secondary market earlier than maturity, then there are two prospects.
# Earlier than 3 years-When you promote the bonds inside three years and if there’s any capital achieve, such capital achieve will probably be taxed as per your tax slab.
# After 3 years – When you promote the bonds after 3 years however earlier than maturity, then such capital achieve will probably be taxed at 20% with indexation.
There isn’t a idea of TDS. Therefore, it’s the accountability of traders 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 (Irrespective of whether or not you bought it on the time of subject or from the secondary market).
I hope I’ve cleared the foremost doubts of those that want to purchase sovereign gold bonds from the secondary market.
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