You pay different taxes on G-secs depending on the type and how long you hold them.
Sovereign Gold Bonds (SGBs) taxation
- If you bought SGBs at the original issue: You do not pay capital gains tax if you subscribed to SGBs at the original issue and hold them until maturity (8 years) or redeem them prematurely after 5 years.
- If you bought SGBs from the secondary market: You do not receive the capital gains tax exemption at maturity. Whether you sell on the secondary market or hold until maturity, you pay capital gains tax based on your holding period.
-
If sold in the secondary market:
- More than 12 months: 12.5% Long Term Capital Gains (LTCG) tax applies
- Within 12 months: Tax applies according to income tax slab rates
- Interest payments: SGB interest is taxed according to income tax slab rates.
Bonds and State Development Loans (SDL) taxation
- Interest income: Interest credited to the bank account is taxed as "income from other sources" according to income tax slab rates. No Tax Deducted at Source (TDS) applies on G-sec interest payments.
-
Capital gains from price appreciation:
- Long Term Capital Gains (held more than 12 months): 12.5% flat rate
- Short Term Capital Gains (held within 12 months): Tax applies according to income tax slab rates
T-bills taxation
T-bills are bought at a discount and redeemed at full value at maturity. The profit is considered STCG and taxed according to the income tax slab rates.