Buying gold during the festive season is a tradition in India. So, let’s dive into the details of SGB and its tax benefits:
- Characteristics:
> Denominated in grams of gold.
> Issued by RBI on behalf of the Government of India.
> Pays 2.5% annual interest, paid biannually.
> Tenure of 8 years, redeemable after 5 years.
- Eligible Investors:
> Individuals, Trusts, Universities, HUFs, Charitable Institutions.
> Continues even if residential status changes.
- Investment Limits:
> Minimum investment: 1 gram.
> Maximum:
> Individuals & HUFs: 4 kg.
> Trusts and entities: 20 kg.
- Purchase and Sale:
> Available through banks, stock exchanges, or agents.
> Tradable in the secondary market.
SGB Taxation
👉 Taxation on Interest Income:
- Taxed as per Income Tax Act, 1961.
- Added to total income; taxed based on applicable slab.
👉 Taxation on Capital Gains:
- Exemption on Redemption with RBI:
- Capital Gains Tax exempted on redemption with RBI.
👉 Redemption Before Maturity:
- Short-term Capital Gains Tax: < 1 year holding: Taxed at applicable income tax slab.
- Long-term Capital Gains Tax:> 1 year holding: 10% without indexation or 20% with indexation (choose lower).
SGB Tax Benefits:
- No TDS deducted or GST charged on purchase or redemption.
- Capital gains on maturity fully exempt from income tax.
- Indexation benefits available for long-term capital gains before maturity.
Benefits of Investing in SGB
- Secure Storage
- Cost Savings
- Regular Interest
- Loan Collateral
Disadvantages of Investing in SGB**
- Market-Linked Risks: Returns dependent on gold price movements.
- Maturity Period: 8-year maturity might be long for some investors.
