Queries related to SGB purchased from the secondary market

Bonds
1

I have below queries:

  • If I am holding SGB purchased from secondary market which has already passed 5 years from the issue date, how can I surrender it directly to the government?
  • If I am holding SGB purchased from secondary market within a year and it is surrendered to the government after 5/8 years from the issue date, how the tax will be calculated?
2

@Quicko Can you.

3

Explained here.

Since it is STCG, taxed at slab rates. Read more.

4

Thanks for the answer. I would like to elaborate my second question:

I have purchased the SGB from the secondary market. My holding period is less than a year.
How taxation would work in the below two cases.

  • I am surrendering the bond to the government after five years of the original issue date. My holding period is less than a year.
  • Government forfeits the bond after eight years if the issue date. My holding period is less than a year.
5

Both cases are STCG, so taxable at slab rates.
@Quicko can correct, if I got it wrong.

6

Gains from these cases are not taxable, as noted in the quicko link which @TheGouda posted. These two cases fall under “redemption” and hence the gains are not taxable.

7

@Shiv_Katira @TheGouda

To understand the taxability of SGB, the source from where you bought the SGB is not relevant. So the taxability of gains from SGB will depend on where you sell/redeem these bonds.

Once an SGB completes 5 years from its issue date, the RBI opens a buy-back window (pre-mature redemption) where you can redeem it.
If you hold it till 8 years, RBI automatically redeems it on maturity.

In both cases—whether you redeem after 5 years or 8 years—the gains are completely tax-free (exempt from income tax).

Lastly, it will be taxed as capital gains only if you sell it in the secondary market.