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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Other Products

Mr. Rao, a resident individual, subscribed to Sovereign Gold Bonds at Rs 6,000 per gram for 20 grams and holds them until maturity, when they are redeemed by the RBI at Rs 7,500 per gram. What is the tax on the capital gain arising on this redemption?

The tax on the capital gain is nil. Capital gains on redemption of Sovereign Gold Bonds at maturity are exempt for individuals. Only the periodic interest on the bonds is taxable at slab rates, and a sale on the exchange before maturity would be taxed as a transfer.

  1. ARs 3,750, being 12.5% of the gain of Rs 30,000
  2. BRs 6,000, being 20% of the gain of Rs 30,000
  3. CTaxed at his slab rate as short-term gain
  4. DNil, as the capital gain on redemption at maturity is exempt for an individualCorrect

Explanation

Capital gain arising on redemption of SGBs at maturity by an individual is exempt. The gain here is (7,500 - 6,000) x 20 = Rs 30,000, but no tax applies. The 12.5% and 20% options wrongly treat the redemption as a taxable transfer. The semi-annual interest on SGBs remains taxable at slab rates.

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