Budget 2025: SGB Alternatives Likely To Be Introduced - Know What Tax Expert Says

The date on which the Union Budget for FY 2025-26 will be presented is fast approaching. Ahead of the iconic date of February 1 when Finance Minister Nirmala Sitharaman will present the budget, gold investors are speculating about what the new budget has in store for them.

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Earlier in July 2024 the customs duty on the import of gold was reduced from 15 per cent to 6 per cent. Following the custom duty cut reports emerged which suggested that the government was likely to scrap the Sovereign Gold Bond scheme. However, the government has not made any official communication regarding this. Notably, the last tranche of SGBs opened for subscription on February 12, 2024, and closed on February 16, 2024. The issue price of the SGBs in the last tranche was Rs 6,262 per gram of gold.

Sameer Gogia, the Executive Director-Tax at Deloitte dismissed speculation regarding the discontinuation of SGBs. He added that the discontinuation is unlikely however the government may introduce other complimentary options.

“No, this is something(scrapping of SGB scheme) which I believe is unlikely. They can have other complimentary options. But, scrapping I believe will be a little stretching it too far,” Gogia told Outlook Money.

Gogia added that complimentary options which also invest in gold such as digital gold bonds, gold Exchange Traded Funds (ETFs) and gold savings accounts may be introduced in the upcoming budget to sustain the financialization of gold.

“While I think complete replacement will be difficult, there will be some complementary options such as digital gold bonds or Gold ETFs or gold saving accounts. This is just in order to sustain the gold’s financialisation. But full discontinuation of a sovereign gold bond will not be possible,” Gogia said.

Gogia added that there’s speculation regarding the custom duty on the import of gold reducing further after last year’s cut. He added that the custom duty may be reduced to 3 per cent but further reduction is unlikely.

“Actually, the current rate is 6 per cent and there’s a likelihood that it will be reduced to 3 per cent. But, it is actually too low to go further. But, there is a buzz around that it will be less,” Gogia said.

Earlier in Budget 2024 the indexation benefit for gold investments was removed. The indexation benefit helped in adjusting the purchase price of gold for inflation, which lowered the taxable capital gain. Gogia added that while people who invest in gold may expect the re-introduction of the indexation benefit, it is unlikely to be re-introduced. He added that ultimately the re-introduction of the benefit depends on the government’s tax collection and it will decide whether indexation benefits will return or not.

“I doubt it(indexation benefit) will be re-introduced because the changes were just made last year. However, it also depends on the level of the government’s tax collection. Ultimately the data will tell if they want to go back to that or not,” Gogia told Outlook Money.

Gogia added that apart from Sovereign Gold Bonds, the government might announce tax incentives and exemptions to attract digital gold investors. He added that the government might also enhance access to digital gold platforms and announce awareness campaigns in the upcoming Budget to increase investments in digital gold.

“ I think they can introduce a tax incentive or exemption to attract more digital gold investors. They can introduce easier access to digital gold platforms. They can have more awareness campaigns and different complementary products apart from sovereign bonds,” Gogia said.