Are payments received on maturity and interest on SGB bought from the secondary market treated the same way as those from the primary issue?
Yep, the treatment is the same irrespective of where you buy. Here are some bits to note:
- You pay tax as per your slab on the 2.5% interest. The interest is on the issue price always, irrespective of what price you paid while buying in the secondary market.
- If you hold the SGBs for more than 5 years, LTCG is exempt. If you buy SGBs that will mature in lesser than 5 years from the secondary market, then this becomes inapplicable for you.
Thank you for your reply, @mohitmehra. Would you happen to know if selling in the market is treated the same as redeeming from RBI?
Yep, the sale on the secondary market is the same as redeeming with RBI for tax purposes. Also looping @Quicko in case they want to add something.
Nope, I doubt that is true. Capital gains is exempt only for redemption. On transfer (sale on secondary market) you will pay LTCG with indexation benefit. RBI FAQ is very clear on this
I am not sure where you got this 5 year clause from. Can you cite some reference?
As far as I knew, there wasn’t any holding period requirement for getting capital gains exemption.
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Hey @Augustine_Charly,
There can be two scenarios, one, where you hold the bonds till maturity (8 years) and redeem them. And second, you sell the bonds on the stock exchange before maturity. The tax implications would be different in both situations.
- If you hold the bonds till maturity, the capital gains will be completely tax-exempt. That means you do not have to pay any taxes on the capital gains from these bonds.
- If you sell them in secondary markets, the gains will be taxable as short-term (holding period < 12 months) and long-term capital gains based on the holding period (holding period >12 months). STCG will be taxed at slab rate and LTCG will be taxed at 20% with indexation benefit or 10% without indexation.
Hope this helps!
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