Income Tax News: Among a certain group of investors, sovereign gold bonds have grown in favour. Investors find it appealing for a variety of reasons. The security of the investment and the return guarantee are the most crucial of them. Investors are assured that there is no risk associated with their investment because Sovereign Gold Bonds are issued by the Reserve Bank and backed by the government.
Double-Winning Proposition
Additionally, Sovereign Gold Bonds have demonstrated superior earning potential compared to numerous comparable options, such as bank savings deposits. This allows investors to benefit from both the rising price of gold and interest on their initial investment. When viewed in this light, investors are finding that Sovereign Gold Bonds are a double-winning proposition. The money received from this isn’t entirely tax-free, though. We will now go over the math involved in income taxation on the income from Sovereign Gold Bonds.
Capital Appreciation
In addition to capital growth, Sovereign Gold Bonds offer an annual interest rate of 2.5 percent. This is offered once every six months. Capital appreciation is the process through which the value of your investment rises in tandem with the price of gold. There is no concern about loss or theft. The holding of sovereign gold bonds is analogous to the holding of shares in a demat account. This indicates that there are no unique maintenance-related issues.
Base Income Increase
In terms of income taxation on this income, the 2.5 percent interest on the Sovereign Gold Bond is subject to taxation. The income taxpayer’s base income is increased by this earnings. The tax liability is then determined based on the income tax slab that the total income falls under. Consequently, Sovereign Gold Bond interest income is subject to taxation.
Capital Gains Tax Obligation
Redeeming the Sovereign Gold Bond yields the investor’s second source of income. Capital gains tax must be paid by the subscriber upon selling the Sovereign Gold Bond. You may be required to pay either short-term or long-term capital gains tax, depending on how long you held the gold bond. Tax on short-term capital gains is imposed on holding periods under a year. Tax on long-term capital gains must be paid if it lasts longer than a year.
Tax-Free Maturation
In one instance, the income from Sovereign Gold Bonds is also tax-free. You won’t have to pay income tax on the income earned at that time if you hold the Sovereign Gold Bond until it matures. The Sovereign Gold Bond matures in eight years. This implies that there won’t be any income tax due on the maturity account if you hold SGB for eight years.
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