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To make investment in Sovereign Gold Bond scheme more attractive, the government on Monday proposed that redemptions of these bonds by an individual will not attract any capital gains tax.
Deposit certificates issued under Gold Monetisation Scheme, 2015 will also be exempt from capital gains tax.
While the exemption under Sovereign Gold Bond scheme will come into force post April 2017, the waiver for Gold Monetisation Scheme will be effective from April 1 this year.
"It is proposed to provide that redemption by an individual of Sovereign Gold Bond issued by Reserve Bank of India under Sovereign Gold Bond Scheme, 2015 shall not be charged capital gains tax," Finance Minister Arun Jaitley said in his Budget 2016-17 proposals presented in Parliament on Monday.
Government has also proposed to provide indexation benefits to long terms capital gains arising on transfer of Sovereign Gold Bond to all cases of assessees.
Deposit certificates issued under Gold Monetisation Scheme 2015 will not be classified as capital assets, thus exempting them from capital gains tax.
The benefit would be at par with exemptions on interest on Gold Deposit Bonds under Gold Deposit Scheme of 1999.
"With a view to extend the same tax benefits to the scheme as were available to the Gold Deposit Scheme 1999, it is proposed...to exclude Deposit Certificates issued under Gold Monetisation Scheme, 2015 from the definition of capital asset and thereby to exempt it from capital gains tax," the Budget document said.
Also, amendment would be carried out in the Income-Tax Act so that the interest on deposit certificates under the Gold Monetisation Scheme would be exempt from tax.
Under Sovereign Gold Bond Scheme, investors can buy bonds in denominations of 5, 10, 50 or 100 grams for a term of 5-7 years with a rate of interest to be calculated on the value of the metal at the time of investment.
So far, RBI has issued gold bonds twice.
Under the Gold Monetisation Scheme, launched in November 2015, banks are authorised to collect gold for up to 15 years to auction them off or lend to jewellers from time to time.
India imports about 1,000 tonnes of gold every year.
The yellow metal accounts for the second-largest component of the country's import bill after crude oil.
The schemes are aimed at reducing the demand for gold in physical form and also to reduce the import bill to curb capital outflows.
The image is used for representational purpose only. Photograph: Reuters