InvestorQ : I had applied for recent gold bonds issued so could you please tell me the tax implications of these gold bonds?
Anu Biswas made post

I had applied for recent gold bonds issued so could you please tell me the tax implications of these gold bonds?

Answer
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Neelam Naik answered.
11 months ago


You must be aware that these gold bond prices are linked to the underlying price of gold. In addition, the government also pays you 2.5% interest per annum on these gold bonds. If you had made a digital application for these gold bonds, you would have also got a discount of Rs.50 on the stipulated price. Here is what you need to know about the tax implications of the gold bond scheme.

· The interest you earn on these gold bonds at 2.5% per annum is not subject to TDS. So the interest will be credited to your account without any TDS deduction. However, the onus is on you to include this interest in your tax returns and pay tax if applicable.

· The most important aspect is on the capital gains. These gold bonds have a maturity of 8 years and if you hold these bonds till maturity then there is no capital gains tax payable. However, should you exit these bonds earlier or if you sell the bonds in the secondary market, then capital gains tax will be applicable lat the extant rates. The rates of tax will be 20% with indexation if held for more than 3 years and tax at your peak rate if you hold for less than 3 years. It is a lot more profitable to hold for the full tenure to get the full benefit of capital gains tax exemption.

· Although the sovereign gold bonds are pegged to the price of gold, there is no GST (goods and services tax) on purchase of these bonds. This compares favourably with physical gold of any type wherein GST at the rate of 3% is payable on purchases.

These tax advantages make gold bonds more attractive than physical gold in post tax terms.