What is the tax liability in Sovereign gold bond investment?

The tax liability in sovereign gold bonds can be divided in two sections

• Sovereign gold bond tax on interest income:

  2.5% PA interest paid half-yearly directly credited to your bank account. This income is taxed as your regular income. Interest earned is added in your total income and taxed as per the applicable tax slab.

• Sovereign gold bond tax on capital gain:

  The capital gains tax arising on redemption of SGB to an individual has been exempted. So on maturity, the profit from the gold price movement comes as tax-free.

• In case of transfer of bonds/early redemption, the indexation benefits will be provided to long terms capital gains. If you sell investments in sovereign gold bond funds after three years, the gains are treated as Long Term Capital Gains (LTCG). LTCGs are taxed at 20 percent with the indexation benefit. Indexation allows you to inflate the purchase price using the Cost Inflation Index.