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

Mrs. Nair, a resident individual, holds a sovereign gold bond issued by the RBI. Which statement about the taxation of her holding is correct under the stated scheme terms?

Interest on a sovereign gold bond is taxable as income from other sources, while capital gains on redemption at maturity are exempt for an individual. So the interest is taxed at slab rates, but the gain from holding to maturity escapes capital gains tax.

  1. AInterest is exempt, while capital gains on redemption at maturity by an individual are exempt
  2. BInterest is exempt, while redemption gains are taxed as short-term gains
  3. CInterest is taxable as income from other sources, while capital gains on redemption at maturity by an individual are exemptCorrect
  4. DBoth interest and redemption gains are fully taxable

Explanation

The annual interest on sovereign gold bonds is taxable under income from other sources. Capital gains arising on redemption at maturity in the hands of an individual are exempt. The options claiming interest is exempt are wrong, and full taxation of redemption is wrong for individuals.

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