How to show redeemed sovereign gold bonds in your ITR | Fusion - WeRIndia

As the income tax return (ITR) filing deadline approaches, many investors are unsure how to report redemptions from Sovereign Gold Bonds (SGBs).

These government-backed bonds offer 2.5 per cent annual interest and exposure to gold prices, making them a popular and tax-efficient investment.

Redemption via RBI is tax-free

If you redeemed your SGBs through the Reserve Bank of India (RBI), either at maturity or after the five-year early redemption window, no capital gains tax applies.

This is because redemption is not treated as a “transfer” under Section 47(viiic) of the Income Tax Act. As a result, you are not required to report these proceeds as income in your ITR.

Optional reporting under exempt income

Although not mandatory, you may choose to disclose the redemption amount in the Exempt Income (EI) schedule of ITR-2.

This is only a precautionary step. The law does not treat this redemption as taxable income.

Sale on exchange is taxable

If you sold your SGBs in the secondary market rather than redeeming them with the RBI, capital gains tax applies.

• If held for less than one year, gains are treated as short-term and taxed at your regular income slab rate.
• If held for more than one year, gains are treated as long-term:

• For sales before July 23, 2024: taxed at 10 per cent without indexation or 20 per cent with indexation.
• For sales on or after July 23, 2024: taxed at a flat 12.5 per cent without indexation.

Interest income must be reported

The 2.5 per cent annual interest paid on SGBs is taxable. You must report it under “Income from Other Sources” in your ITR.

Here are the key takeaways:

• Redemption via RBI is fully tax-exempt.
• Reporting in ITR is optional but not required.
• Selling SGBs on exchanges is taxable based on the holding period.
• Interest income must always be disclosed.

SGBs remain a smart, tax-efficient option for digital gold investors.

Be sure to file your ITR correctly based on how you handled your investment.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on March 04, 2017

Image Reference: https://pxhere.com/en/photo/971712