SGB Taxation in Secondary Market

If I purchase SGB in secondary market and maintain for 3 to 4 yr and held until maturity on this case I have to pay capital acquire tax or tax free?

With the intention to be eligible for exemption from capital beneficial properties tax, the SGBs have to be held until maturity (i.e 8 years), that is potential provided that it bought from the first market from the RBI.

Any buy from one other individual by way of secondary market will entice capital beneficial properties tax IMO

U can refer this FAQ from RBI

RBI SGB FAQs.

@Quicko can affirm this.

EDIT: I Imagine making use of for SGBs by way of dealer platform too is taken into account secondary market, so to take away confusion, if the SGBs are bought from some other individual apart from the RBI by way of secondary market, will probably be taxed.

Thanks and what’s IMO means?

It’s a quick type of : In My Opinion (IMO)

RBI faq states redemption with RBI is tax free.

RBI redemption occurs on maturity or else after they ask if you wish to promote after 5 years. First half is tax free, second half is the way you interpret the FAQ.

This was mentioned right here

It’s bit gray out right here. I believe regulation solely says that capital beneficial properties is tax free if SGB is held until maturity.
It doesn’t differentiate if SGB have been purchased in main market or secondary market.

This shouldn’t be a priority as a result of no matter you held until maturity can be tax free.
In your ex, you purchased 10 in main market and 5 from secondary (however that distinction is immaterial).
So should you held all 15 until maturity, CG for all 15 can be tax free
should you offered 5 in between and held 10 until ma…

and in another threads as properly

Sure, the RBI FAQs on the taxability is a bit ambiguous and is open for interpretation, I consider the untimely redemption (anytime after the fifth yr however earlier than maturity) can be taxed, as they don’t seem to be thought-about as redemption, quite they’re thought-about as untimely redemption.

And as frequent sense would have it, the advantages of tax exemption are offered, in order to make sure that the funds are locked in for 8 years, in order that they are often utilised by the federal government for its funding necessities.

Let’s take the instance of time period deposits, as within the case of time period deposits, penalties are concerned if funds are withdrawn sooner than the maturity date, equally for untimely redemption of SGBs the federal government penalises by not offering tax exemption, in order to discourage early redemption.

So, though there could possibly be contrasting views, IMO tax exemption is relevant provided that they’re held until maturity for the total time period of 8 years.

Hey @Ravi_Shankar,

Whether it is redeemed with RBI on maturity, the capital beneficial properties can be exempted from taxes.

I don’t assume redemption with the RBI may be thought-about as the one standards for granting capital beneficial properties tax exemption.

This is able to imply that the holding interval shouldn’t be considered.

Can I maintain for only one yr by buying it on the seventh from secondary market and redeem it with RBI within the eighth Yr to avail the tax exemption, i don’t assume so.

The RBIs FAQ is evident on the truth that the second the SGBs get transferred to anybody else through the secondary market, it loses the capital beneficial properties tax exemption.

This may be understood from the next line from the FAQ

“The indexation advantages can be offered to lengthy phrases capital beneficial properties arising to any individual on switch of bond”

The one time indexation would matter is that if the beneficial properties or taxed, if the beneficial properties are usually not taxed, then the idea of indexation has no relevance.

The redemption with RBI is one side, however holding until maturity(8 years) appears to be the important thing eligibility of capital beneficial properties tax exemption.

I don’t assume authorities’s intention was to grant exemption by merely redeeming it with RBI regardless of the holding interval, the intention would have been to guarantee the lock in of the funds until it’s maturity.

I believe on the time of submitting tax solely we are able to come to know. Any how thanks to your insights thanks

The RBI FAQs are clear on this. They are saying:

The capital beneficial properties tax arising on redemption of SGB to a person has been exempted.

You’re over-analyzing this and making a easy factor, difficult.

My intention was solely to interrupt down the logic behind granting exemption, i’m not complicating something, it’s the provision or FAQ that lacks readability and stays ambiguous or open for interpretation.

Redemption is an easy phrase , i can maintain the SGBs over the past one yr of the tenure by buying it from somebody within the seventh yr and redeem it with RBI, does it imply my beneficial properties are exempt? I don’t assume so.

Anyhow, I used to be simply expressing my opinion and there may be disagreements

You’ll be able to checkout out the next articles that again my opinion

Tax advantages of SGBs

Untimely sale / redemption remedy

Holding until maturity is the important thing

Redemption is an easy phrase , i can maintain the SGBs over the past one yr of the tenure by buying it from somebody within the seventh yr and redeem it with RBI, does it imply my beneficial properties are exempt? I don’t assume so.

However why don’t you assume so, regardless that the sentence within the FAQ is unambiguous?

To phrase this one other manner: The FAQ doesn’t say about whether or not beneficial properties from SGBs bought from the secondary market on Mondays are exempt from tax on redemption. Would you assume that subsequently, it’s affordable to fret whether or not it’s OK (from the standpoint of lowering taxes) to purchase SGB from the market on Mondays?

The assertion within the FAQ is as black-and-white as it may be.

@QuickoThis remains to be bit unclear, if sbg is purchased in secondary market and held until maturity, regardless of the holding interval b/w buy from secondary market to maturity, perhaps be 1, 3 or 6 years is exempt from tax? so long as held until maturity