Which taxes are applicable if you sell Gold or SGB (Sovereign Gold Bonds) in 2024

In today’s world of investment, Gold investment is the most preferred and popular choice among investors. People love it because it’s seen as a safe bet when things get shaky, and it can also make you richer over time. And now, there’s another option called Sovereign Gold Bonds (SGBs), which is backed by the Government of India and works as a hedging tool that can beat inflation and other global uncertainties.

 In the near future, if you plan to sell your gold or SGBs, you need to know about tax implications. This blog will explain the taxes you might face when selling gold or SGBs and the current scenario of SGBs in 2024.

What is an SGB (Sovereign Gold Bond) and how do you buy it?

Sovereign gold bonds are certificates authorized by the RBI and are given for every gram of gold you own. It was introduced in November 2015 by the Government of India to offer an alternative investment option to physical gold. They let you invest in gold without worrying about keeping it safe. These bonds are a safe way for people to invest because the price of gold doesn’t change as much as other things in the market. Since gold is always wanted by many people, its price usually goes up over time, making it a great investment choice.

To Buy SGBs through authorized banks, post offices, or recognized stock exchanges during specific issuance periods announced by the Reserve Bank of India RBI(https://www.rbi.org.in/). Simply fill out an application form with your PAN details, bank information, and desired quantity of SGBs, then make the payment through cash, cheque, or online transfer. After purchase, you’ll receive confirmation of your investment, and you can choose to hold the bonds until maturity or trade them on the secondary market.

Recently the Sovereign Gold Bonds (SGB) 2023-24 Series-IV was available for investors to invest between February 12, 2024, to February 16, 2024. The seven-day period was for the SGBs to be issued, and this particular series was expected to be issued by February 21, 2024.

SGBs (Sovereign Gold Bonds) Issue in 2024-25

Previously Issued Sovereign Gold Bonds (SGBs) Maturity and Redemption in 2024

This year two Sovereign Gold Bonds (SGBs) that were issued in 2016 are now ending in 2024 and are ready for their final payout. The SGB 2016 Series I, which began on 8 February 2016, has completed its 8-year bond period and is now due for redemption. It was initially priced at Rs. 2,600 per gram, and each SGB unit will be redeemed for Rs. 6,271.

The SGB 2016 Series II finished its 8-year term and matured on 28 March 2024 (since 29 March 2024 is a holiday). It was launched on 29 March 2016, and now it’s time for its final payout. Each SGB unit will be redeemed for Rs. 6,601.

This year, the Sovereign Gold Bonds from the 2016-17 series, including Series I, Series II, and Series III, will also be ready for their final payout. SGB 2016-17 Series I, which started at Rs. 3,119 on 5 August 2016, is expected to be redeemed in August 2024. Series II, which began on 30 September 2016 at Rs. 3,150, is expected to be redeemed in September 2024. Lastly, Series III, which began at Rs. 3,007 on 17 November 2016, is expected to be redeemed in November 2024.

What are the Tax implications on the sale of Gold in India?

People who pay taxes may own gold in different forms like coins, jewelry, or bars. When they sell their gold, whether they pay taxes on the profit depends on whether they had the gold for business purposes or as personal savings.

1. Taxation for Stock-in-Trade – Individuals holding physical gold as stock-in-trade are liable to tax under the head of “Profits and Gains of Business or Profession.

2.Taxation for Personal Assets/Investments – Profits from the sale of gold held as personal assets or investments are taxed under the head of “Capital Gains.

3. Capital Gains Tax – When retail investors sell their gold investments, they need to consider capital gains tax, which is a tax on the profit they make from the sale. This tax applies to the increase in value of the gold investment since they acquired it.

4. Long term Capital Gains Tax – If you sell physical gold that you’ve kept as an investment for more than three years, it’s seen as a long-term asset. According to the Income Tax Act, you’ll pay a tax of 20%, plus extra charges, on the profit. You may get a benefit called indexation if you’ve held the gold for a long time.

5. Short term Capital Gains Tax – If you sell your gold investment before holding it for 36 months, it’s considered a short-term asset. In this case, the tax you pay on the gains depends on your income tax slab rate. This means the tax rate will be based on your total taxable income for the year.

What are the Tax implications on the sale/redemption of SGBs in India?

1. Taxation on Interest Income from SGB – Sovereign Gold Bond (SGB) holders are entitled to earn interest at a rate of 2.5% per annum on their initial investment. However, this interest income is subject to taxation as per the Income Tax Act, and it will be taxed at the applicable slab rates under the category “Income from Other Sources.

2. Taxation on SGB Maturity Redemption – According to Section 47(viic) of the Income Tax Act, when individuals redeem their Sovereign Gold Bonds (SGBs) at maturity, it’s not considered a “transfer.” Consequently, individual taxpayers who redeem their SGB investments upon maturity are exempt from paying any capital gains tax.

3. Taxation on selling SGB before Redemption – If an investor chooses to sell or transfer their Sovereign Gold Bonds (SGBs) before they mature, they will be responsible for paying capital gains tax. Any profits made from the sale or transfer of SGBs prior to maturity will be subject to taxation as long-term capital gains. The tax rate applied will be either 20% with the benefit of indexation or 10% without indexation, whichever results in a lower tax amount.

Conclusion

As investors navigate the process of selling gold or Sovereign Gold Bonds in 2024, understanding the tax implications is essential for making informed decisions. By staying informed about capital gains tax rates, indexation benefits, wealth tax (if applicable), and other relevant considerations, investors can optimize their tax outcomes and maximize their returns from these investments.

Sources: msn, cleartax,