Redemption by an individual of sovereign gold bonds issued by RBI not to constitute transfer for the purpose of levy of capital gains tax [Section 47(viic)] Related amendment in section: 48
Effective from: A.Y.2017-18
(i) Sovereign Gold Bond Scheme, 2015
This scheme has been introduced by the Government of India to reduce the demand for physical gold and consequently, reduce the foreign exchange outflow due to import of gold. The two-fold benefit of this scheme are:
(1) The gold bond would serve as a substitute for physical gold; and
(2) The gold bond would provide security to the individual investor investing in gold for meeting their social obligation.
(ii) Redemption by an individual of sovereign gold bonds (SGBs) not to constitute transfer Section 47 enlists transactions which are not considered as transfer for levy of capital gains.
New clause (viic) has been inserted in section 47 with effect from A.Y.2017-18 to provide that any transfer of sovereign gold bonds issued by RBI under Sovereign Gold Bonds Scheme, 2015, by way of redemption, by an assessee being an individual would not constitute a transfer for the purpose of levy of capital gains tax.
(iii) Benefit of indexation available on LTCG on transfer of SGBs [Third proviso to section 48]
Further, benefit of indexation would be available in respect of long-term capital gains arising from transfer of such sovereign gold bonds.
(iv) Rupee Denominated Bonds (RDBs)
Also, as a measure to enable Indian companies to raise funds from outside India, the RBI has permitted them to issue rupee denominated bonds outside India.
(v) Rupee appreciation gains on redemption of RDBs not to be included in full value of consideration [Fourth proviso to section 48]
Accordingly, in case of non-resident assessees, any gains arising on account of rupee appreciation against foreign currency at the time of redemption of rupee denominated bond of an Indian company subscribed by him shall not be included in computation of full value of consideration. This would provide relief to the nonresident investor who bears the risk of currency fluctuation.