ITR Filing Alert: Should You Report Sovereign Gold Bond Redemption Proceeds In Your Tax Returns?
ITR 2025: Redeemed your Sovereign Gold Bonds—do you need to declare them, or are they fully tax-free?
As the income tax return (ITR) filing deadline approaches, many investors are raising questions about how to disclose their investments and redemptions. One common query relates to Sovereign Gold Bonds (SGBs)—a popular instrument for investing in digital gold. While SGBs enjoy special tax treatment, investors are often unsure whether redemption proceeds need to be declared in their ITR.
Understanding Sovereign Gold Bonds and Taxation
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Sovereign Gold Bonds, issued by the Reserve Bank of India (RBI), are unique because they combine the safety of government backing with exposure to gold prices. Apart from the 2.5% annual interest paid on the issue price, investors also benefit from capital appreciation in gold.
The key tax benefit is that maturity proceeds on redemption are fully exempt from capital gains tax. This exemption applies to all SGBs redeemed with the RBI, whether bought at issuance or in the secondary market. The exemption is available because, under Section 47(viiic) of the Income Tax Act, redemption of SGBs is not treated as a “transfer" of a capital asset.
What If You Sell SGBs Before Maturity?
The tax treatment changes if the bonds are sold on an exchange or transferred privately. In such cases, the profits are treated as capital gains:
- Short-term capital gains (STCG): If held for less than one year, gains are taxed as per your income tax slab.
- Long-term capital gains (LTCG): If held for more than one year, gains were earlier taxable at 10% without indexation or 20% with indexation. For transfers made on or after July 23, 2024, LTCG is taxed at 12.5% without indexation.
Thus, while redemption through RBI is completely tax-free, sales through the secondary market can attract capital gains tax.
Do You Need to Report Redemption Proceeds in ITR?
Since redemption is not treated as a transfer under tax law, there is no question of capital gains accruing to the investor. Therefore, you are not required to report such redemption proceeds as income in ITR-2 (AY 2025–26 or any other year).
However, if you wish to err on the side of caution, you may disclose the redemption amount under the Exempt Income (EI) schedule of your ITR. This is optional, as the law does not consider the redemption proceeds to be income at all.
Tax experts reiterate that SGBs remain one of the most tax-efficient ways of holding gold. Investors not only earn guaranteed annual interest but also enjoy complete exemption from capital gains tax upon redemption.
For those looking at liquidity, the RBI allows early redemption after five years on an interest payment date. Even then, the tax exemption on redemption continues to apply.
That means if you have redeemed your SGBs on maturity or through RBI’s early redemption window, you don’t need to report long-term capital gains in your ITR. If you sold them on an exchange, then capital gains tax provisions apply.
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