Taxation on Government bonds (G-Secs), T-Bills and State Development Loans (SDLs)

Hi @Quicko, how does taxation on T-bills, G-Secs and SDLs work in scenarios like;

  • Sold in market before maturity
  • Held until maturity
  • and how is interest received taxed?

Thanks.

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Hello @Parth111,

The taxation on such securities shall be as follows in each of the cases:

  1. If security is sold in the market before maturity: The gain/ loss on redemption is taxed as capital gains (i.e difference between invested value and redemption value)

  2. If security is held till maturity:
    a) If the bond was issued at discount and redeemed at par - The difference between Invested value and
    redeemed value will be taxed as capital gains. (Bonds are not issued at discount in India
    anymore, however, if you purchase bonds at a discounted price from the secondary market then capital
    gains shall arise)
    b) If the bond was issued and redeemed at par - No capital gain shall arise in this scenario.

  3. The interest received on such securities shall be taxable under the head income from other sources at a slab rate.

You can refer to this article to read more about the rate of taxation for capital gains: Income Tax on Bonds & Debentures - Learn by Quicko

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If I reinvest in that FY, no taxes for that FY isn’t it? Say like I redeemed 10L and want to reinvest that. If I reinvest no taxes isn’t it?

Should one open CGAS account and use that for redeeming LTGC and reinvestment than a traditional bank account?

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I don’t think this is true.

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Minimum year is 1 year for government securities and listed securities right.

If it’s long term I can claim with indexing 20% or without 10%

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Hello @raoawesome,

To save taxes on Long term capital gain, deduction under sections 54F and 54EC can be claimed against long-term capital gain on securities.

Deduction u/s 54F is available if a new residential house is purchased within 1 year before or 2 years after the date of transfer of the original asset.

Deduction u/s 54EC is available if gains are reinvested in the specified bonds up to a maximum of INR 50 Lakhs within 6 months from the date of transfer of the original asset.

If you fail to make the investment within the stipulated time then you can deposit the funds in the CGAS account.

You can read more about it here: Capital Gain Exemption under the Income Tax Act - Learn by Quicko

Hope this helps!

2 Likes

Hi @Quicko I had purchased 91 day T-bill on zerodha in FY 2022-23. Will the gains on same be automatically considered while filing ITR via Quicko ? I am not able to see the T-bill in the Tax PnL report downloaded from zerodha console.

Hi @darshancool25

You will have to manually enter the gains on Quicko as this data is not fetched from Zerodha on importing the trades.