Capital Gains Exemption In SGBs Not For Secondary Buyers, Premature Sales
What happened? The budget proposes to remove the capital gains exemption on Sovereign Gold Bonds from secondary market buyers, early sales and non-individuals to reduce speculation and increase government revenues.
Capital gains exemption will only apply to those who subscribe for them at the time of initial issue and hold them continuously until redemption at maturity, which is eight years. This feature will only be available for individual subscribers.
“It is also proposed to ensure that this exemption applies uniformly to all Sovereign Gold Bonds issued by the Reserve Bank of India,” the Budget said.
According to Kedia Commodities MD Ajay Kedia, the proposal will curb speculation in SGBs and treat the bonds as an investment and not as a trading instrument. Capital gains will reduce the secondary premium by 10-15 percent.
It will also boost primary demand for the RBI issue and provide an additional Rs 5000 crore to the government as extra LTCG from secondary sales.
“The purpose of the SGBs was to protect the interests of retail investors. However, lately traders and speculators have been showing interest in bonds and the new proposal will impact trading activities,” he said. This will discourage arbitrage trading in bonds, which offer additional interest along with the benefit of the metal’s price appreciation.
