SGB taxation in budget 2024: Changed capital gain tax on maturity, selling prematurely in RBI's buyback or on stock exchange
Sovereign Gold Bonds (SGBs) are an important investment option for retail individual investors. Any change in the taxation of SGB will have a material impact on your total returns. Budget 2024 has proposed several changes that may directly affect the taxability of your SGB investment if it is sold before maturity or prematurely redeemed.
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As per the new budget proposals, all listed securities will now be considered a long-term asset if held for more than 12 months and will now attract a long-term capital gain tax of 12.5%. But the issue that comes up is whether SGBs should be regarded as listed securities.
According to Deepa Dalal, Partner, Deloitte India, «All SGBs are listed and can be sold in the secondary market just like stocks.» So, how will SGBs be taxed since they can either be sold through the stock market or redeemed through RBI buyback /final redemption windows.
What was the tax treatment of SGBs before Budget 2024?
According to Dalal, «Prior to finance budget 2024 revamping the capital gains tax regime, SGBs which were classified as long-term capital asset (held for more than 36 months) were chargeable to tax @ 20% (with indexation benefit) or 10% (without indexation benefit), whichever is more beneficial. The benefit of indexation on SGBs was specifically provided for by way of fourth proviso to section 48 of the Income Tax
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