Are SGBs tax free? If they are taxed then how?
Not completely. But Sovereign Gold Bonds do offer some of the best tax benefits compared to physical gold.
If you redeem them at maturity, they are fully exempt from capital gains tax.
Also, if you redeem SGBs directly with the RBI, they will not treat it as a transfer. This falls under Section 47(viiic) of the Income Tax Act.
So, no capital gains arise and there is no need to declare LTCG in your ITR. But if you still wish to disclose it, you can mention the redemption amount under the Exempt Income schedule of the Income Tax Return.
If you sell your SGBs before maturity on an exchange or transfer them privately, the profits will be taxed. These profits are capital gains. Short-term, if held for less than a year, long-term if held longer.
Before 23rd July 2024, the tax on long-term gains was 10% without indexation or 20% with indexation. After that date, the rate became 12.5% without indexation.