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

Under the Income-tax Act as applied in NISM-Series-X-B, which of the following is a feature of the tax treatment of Sovereign Gold Bonds (SGBs) issued by the RBI on behalf of the Government of India?

For an individual who holds a Sovereign Gold Bond until maturity and gets it redeemed by the RBI, the capital gain on redemption is exempt from tax. The 2.5% annual interest remains taxable as income from other sources.

  1. AInterest of 2.5% p.a. is exempt from tax in the hands of the individual investor
  2. BCapital gains on redemption at maturity by an individual are exempt from taxCorrect
  3. CTDS at 10% is deducted from the interest paid on the bonds
  4. DCapital gains on redemption are always taxed at slab rates irrespective of holding

Explanation

The fixed interest on SGBs is taxable as income from other sources, so the interest exemption option is wrong. Capital gains arising on redemption at maturity in the hands of an individual are exempt. No TDS is deducted on SGB interest, and redemption gains are not taxed at slab rates for individuals.

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