Gold as a physical capital asset attracts capital gains liability on sale in case its value appreciates over the course of holding. Nonetheless in order to promote paper investment in gold through the various schemes, govt. has exempted capital gains liability on redemption at maturity which is after 8 years of initial investment.
However when it comes to pre-mature redemption which is allowed after a holding period of 5 years on the interest payment date, the taxation regime is not clear. Here in this story we attempt to clear the air around it:
SGBs launched in the year 2015 aims at promoting paper form of investment and hence discourage physical investment in gold. The press release by the Finance Ministry says, 'The capital gains tax arising on redemption of SGB has been exempted.'
Capital gains exemption extended for pre-mature exits for individuals but not HUFs and other trust
As per a leading business daily report, a telephonic response from the finance ministry officials says that the benefit of capital gains exemption in case of pre-mature exit is also allowed for only retail investors. Nonetheless other investor categories such as HUFs and trusts are not given the benefit.
Tax rates for LTCG implications for trust and other investor categories
If the asset which is a better investment in contrast to physical gold is held for 3 years or less than a short term capital gains tax implication will arise as per the applicable slab rate of the investor while in the other case an indexation benefit will be provided @ tax liability of 20%.
Interest or coupon payments also taxable
For this financial year too, the govt has announced the payment of 2.5% per annum which shall be payable half yearly and on it investors will have to pay taxes as per the applicable slab rate as this income will be added to the concerned total taxable income.
Note SGBs can also be secured from the secondary market as these get listed on the bourses in a fortnight's time after the issue is closed for subscription.