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Ch.1 · Savings vs Investment Avenues · hard

What is the tax treatment of capital gains on Sovereign Gold Bonds (SGBs) if held to maturity (8 years)?

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EXPLANATION

Capital gains arising on redemption of SGBs at maturity are fully exempt from capital gains tax. Additionally, the 2.5% annual interest is taxable at slab rate. If sold before maturity on the secondary market, LTCG with indexation applies.

A.Taxed at 20% with indexation as LTCG

B.Fully exempt from capital gains tax [✓ Correct]

C.Taxed at the investor's slab rate as interest income

D.Taxed at 12.5% without indexation

EXPLANATION

Capital gains arising on redemption of SGBs at maturity are fully exempt from capital gains tax. Additionally, the 2.5% annual interest is taxable at slab rate. If sold before maturity on the secondary market, LTCG with indexation applies.

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