ITR Filing FY25: Should You Report Sovereign Gold Bond Redemption Proceeds in ITR?

Sovereign Gold Bonds (SGBs) are unique because their redemption is not treated as a transfer under Section 47(viiic) of the Income Tax Act.

Since capital gains can only arise from the transfer of a capital asset, redemption proceeds are completely exempt. Investors are therefore not required to report redemption proceeds in their ITR-2 or any other return.

Optional Disclosure in ITR

Although not mandatory, cautious investors may choose to disclose redemption amounts under the Exempt Income (EI) schedule of their ITR. This is entirely optional, as the proceeds are not considered income at all.

Tax Treatment on Sale of SGBs

The exemption applies strictly to bonds redeemed with the RBI. If SGBs are sold on an exchange or transferred privately, the gains are taxable:

• Short-term capital gains (STCG): Taxed at slab rates if held for less than one year.
• Long-term capital gains (LTCG):For sales after one year, gains are taxable at 12.5% without indexation (for sales/redemptions on or after 23 July 2024). Earlier, LTCG was 10% without indexation or 20% with indexation.

Other Benefits of SGBs

Apart from tax-free redemption, SGBs offer 2.50% annual interest on the issue price, along with potential appreciation in gold prices. Investors can also opt for early redemption after five years on interest payment dates.

Also Read: ITR Filing FY25: Is Capital Gain from Ancestral Property Taxable in India?

Conclusion

Redemption of Sovereign Gold Bonds is fully exempt from tax and does not need to be reported in your ITR. However, if sold on the exchange, capital gains tax applies. For cautious reporting, investors may optionally show redemption proceeds under exempt income.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.