Summary of this article
From April 1, SGB tax exemption only for original subscribers.
Secondary market SGB investors will pay capital gains tax.
Exchanging old jewellery triggers tax based on price appreciation.
If I purchase sovereign gold bonds (SGB) from the secondary market and hold them till maturity, then will I be eligible for capital gains tax exemption?
Under the existing provisions of the law, tendering of SGB to the Reserve Bank of India (RBI) not only on its maturity of eight years but even after five years from date of issue is not treated as transfer and therefore there is no capital gains tax liability on the appreciation in such SGB.
The law is proposed to change from April 1, 2026 restricting the availability of the capital gains exemption only for the original subscribers who hold the SGB till its maturity.
So if you have redeemed the bonds before March, 31, 2026, the capital gains are exempt, but if you redeem the same after March 31, 2026 the same will be taxed in your hands as capital gain. The gains will be treated as long-term if the bonds are held for more than 12 months and taxed at flat 12.50 per cent. The capital gains will be taxed at your slab rate if the same are transferred within one year from their purchase.
What is the tax treatment on exchanging old jewellery for new jewellery at the jewellers’ shop?
Under income tax laws, the transaction of surrendering old gold jewellery for new jewellery is considered as an exchange. The liability to capital gains arises on transfer of a capital asset. Exchange of one capital asset for another is also treated as transfer for income tax purposes giving liability for capital gains tax.
The actual liability will depend on the appreciation in the value of old jewellery over its purchase price. The capital gains will be treated as long term if the old jewellery is being exchanged after two years, else they will be treated as short-term capital gains (STCG).
Long-term capital gains (LTCG) are taxed at a flat rate of 12.50 per cent whereas STCG is taxed at the taxpayer’s slab rate.
The author is a tax and investment expert and can be reached on jainbalwant@gmail.com
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
