Sovereign Gold Bonds

Sovereign Gold Bonds are government securities denominated in grams of gold. They are substitutes for holding physical gold.
 

Sovereign Gold Bonds (SGBs) in India offer a fixed interest rate of 2.50%, credited semi-annually. Sovereign Gold Bonds (SGBs) in India are subject to taxation both on interest income and capital gains. There are 3 parts to its taxation:

On Interest:
While there is no TDS, interest income is taxed based on your applicable tax slab.

On Capital Gains:
Capital gains arise from the appreciation in the price of SGBs. If you purchase gold at ₹60,000 per 10 grams and it rises to ₹66,000, your capital gains are ₹6,000.
 

Now, SGBs mature after 8 years, with an option for early redemption after 5 years. The profits upon final redemption are entirely tax-free.

For redemptions before maturity:

Short-term Capital Gains Tax: If sold within 1 year of investment, your gains are treated as short-term capital gains, taxed at your slab rate.
 

Long-term Capital Gains Tax: Selling after 1 year incurs Long Term Capital Gains (LTCG) tax. It's either a flat 10% without indexation benefits or 20% with indexation benefits. You can choose whichever is lower.
 

Don’t Forget: Long-term capital gains will be taxed at 20% with an indexation benefit if the SGB is redeemed after the lock-in period of 5 years but before the maturity period of 8 years.