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Strategy Guide

SGB Tax Harvesting Strategy

Optimize tax efficiency in your SGB portfolio

**What is SGB Tax Harvesting?**

Tax harvesting with SGBs involves strategically managing your SGB holdings to minimize tax liability while maintaining gold exposure.

**Key Tax Rules (Budget 2026):** - **Original Subscribers:** Maturity gains are TAX-FREE - **Secondary Market Buyers:** 12.5% LTCG (no indexation) - **Interest:** Taxable at slab rate for all

**The Strategy:** Since tax treatment differs based on acquisition source and exit timing, you can optimize by choosing the right mix of primary (if available) vs secondary SGBs, and timing your exits appropriately.

Benefits

  • Minimize capital gains tax
  • Leverage tax-free maturity for original holdings
  • Offset gains with losses strategically
  • Optimize interest income timing
  • Higher post-tax returns

Risks & Considerations

  • Tax laws can change
  • Complexity in tracking and execution
  • May limit investment choices
  • Requires good record-keeping
  • Not suitable for all investors

Step-by-Step Implementation

1

Understand your tax situation

Know your income tax slab and applicable capital gains rules.

Tips:

  • Higher slab = more benefit from tax-free maturity
  • Track acquisition source for each SGB
  • Understand LTCG vs STCG implications
2

Prioritize tax-free maturity

Hold SGBs bought from primary issues till maturity for tax-free gains.

Tips:

  • Don't sell primary-issue SGBs early
  • Maturity gains are completely tax-free
  • Interest remains taxable regardless
3

Time secondary market exits

For secondary market SGBs, time exits to qualify for LTCG.

Tips:

  • Hold for 12+ months for LTCG (12.5%)
  • STCG taxed at slab rate (up to 30%)
  • Consider selling near maturity if needed
4

Harvest losses if applicable

If any SGB is at a loss, consider selling to offset other gains.

Tips:

  • Capital losses can offset capital gains
  • Carry forward unused losses for 8 years
  • Ensure compliance with wash sale concepts
5

Plan interest income

Interest is taxable at slab rate - plan accordingly.

Tips:

  • Interest adds to total income
  • No TDS, but include in ITR
  • Higher holdings = more interest = higher tax

Best For

  • High-income taxpayers (30% slab)
  • Those holding SGBs from primary issues
  • Long-term investors
  • Tax-conscious investors

Not Suitable For

  • Those in 0% tax slab (no benefit)
  • Short-term traders
  • Those without good record-keeping
  • NRIs (different tax rules apply)
**Disclaimer:** This strategy guide is for educational and informational purposes only. It does NOT constitute investment advice, financial advice, or a recommendation to buy or sell any securities. Investment strategies involve risks and may not be suitable for all investors. Past performance does not guarantee future results. Gold prices can be volatile and SGBs have lock-in periods. Please consult a SEBI-registered investment advisor before implementing any investment strategy. Consider your risk tolerance, investment horizon, and financial goals. **Tax Disclaimer:** Tax laws are subject to change. This information is based on Budget 2026 provisions. Please consult a qualified Chartered Accountant for personalized tax advice.

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Frequently Asked Questions

For original subscribers (bought from RBI primary issues), YES - maturity gains are completely tax-free under Budget 2026 rules. Secondary market buyers pay 12.5% LTCG.
Generally NO for primary-issue SGBs as you lose tax-free benefit. For secondary market SGBs, selling might make sense if you have losses to harvest or specific tax planning needs.
Interest (2.5% p.a.) is taxable at your income tax slab rate. It's added to your total income. No TDS is deducted, but you must report it in your ITR.

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