The Reserve Financial institution of India (RBI) has mounted the untimely redemption of Sovereign Gold Bond (SGB) Collection IV of 2017-18 collection at Rs 5028 per bond. The SGB was issued on October 23, 2017 at Rs 2987 per bond. On October 21, it traded at Rs 5000 per bond with the image ‘SGBOCT25IV’ on the Nationwide Inventory Trade (NSE).
This specific SGB has given an annual return of 11 % Compound Annual Progress Charge (CAGR) and an absolute return of 68 %.
Desk displaying the calculation of return proportion for SGB 2017-18 Collection IV
RBI stated the choice to go forward with the date of untimely redemption was produced from October 22 and October 23 falls on weekends (Saturdays and Sundays). Subsequently, it stated, October 21 is taken into account the primary due date of untimely redemption.
Curiosity on Sovereign Gold Bonds is paid half-yearly; Subsequently, October 21 would be the first untimely redemption date. When you miss exercising your bonds on this buyback window, you may look forward to the second buyback window after six months, round March-April. The curiosity on this bond is 2.5 % and is taxable.
What are the modes of redeeming SGBs?
You possibly can promote your SGB in two methods. Whereas one gives higher tax effectivity, the opposite gives fast liquidity.
Tax Environment friendly Course of – RBI Buyback Window
Within the FAQ, RBI stated that each ‘particular person’ is exempted from capital beneficial properties tax arising on redemption of SGBs. So should you redeem your SGB via the RBI buyback window, which is from the fifth 12 months onwards, you’ll not be liable to capital beneficial properties tax.
Preliminary Liquidity Course of – Inventory Trade
The tenure of the SGB is eight years, with the choice of redemption from the fifth 12 months onwards. However if you wish to exit these bonds earlier than 5 years, it is advisable de-materialize them earlier than promoting them on NSE or Bombay Inventory Trade (BSE).
If you’re already holding these bonds in demat, there isn’t any have to dematerialize once more. Nonetheless, notice that your stockbroker could cost you brokerage for the transactions.
The transaction is known as a switch of bonds; Therefore it’s topic to capital beneficial properties tax, however you’ll get indexation profit should you promote after 12 months.