Taxation : Sovereign Gold Bond Scheme vs Physical gold

Taxation : Sovereign Gold Bond Scheme vs Physical gold 

Tax Changes in Sovereign Gold Bond Scheme : There have been some important changes made in taxation to make the Sovereign Gold Bond Scheme lucrative. These changes are made in FY 2016-17

Taxation in case of Sovereign gold bonds :

Taxation in case of Redemption/Sale –Sovereign gold bonds are subject to capital gains tax treatment from FY 2016-17 onwards and gains are tax exempt if these bonds are redeemed after 5 years. Moreover, if these bonds are sold on the stock exchanges after 3 years from the allotment date, indexation benefits can be availed to calculate your capital gain or loss.

As per the Budget speech "It is proposed to provide that redemption by an individual of Sovereign Gold Bond issued by Reserve Bank of India under Sovereign Gold Bond Scheme, 2015 shall not be charged to capital gains tax. It is also proposed to provide that long terms capital gains arising to any person on transfer of Sovereign Gold Bond shall be eligible for indexation benefits".

So, as an individual, whenever you redeem these gold bonds after holding them for 5 years, you are not liable to pay any capital gains tax. Indexation benefit will also result in a substantial tax saving.

Capital gain tax arising on redemption of SGB to an individual has been exempted. Earlier capital gain tax was imposed at the same rate as in the case of physical gold. Further, indexation benefit has been provided to long-term capital gains arising to any person on transfer of bonds

The department of revenue has said that they will consider indexation benefit if bond is transferred before maturity.

Taxation in case of physical gold  :

In cash of physical gold, you have to pay tax on capital gain which is proposed at 20% with indexation if held for long term. Long term here means 36 months or more. If the units are redeemed before completion of 36 months, redemption amount would be taxed as per your tax slab.