Short answer

You pay different taxes on G-secs depending on the type and how long you hold them.

Sovereign Gold Bonds (SGBs) taxation

If held until maturity (8 years) or redeemed after 5 years: No capital gains tax applies.

If sold in the secondary market: More than 12 months: 12.5% Long Term Capital Gains (LTCG) tax applies Within 12 months: Tax applies according to income tax slab rates

More than 12 months: 12.5% Long Term Capital Gains (LTCG) tax applies

Within 12 months: Tax applies according to income tax slab rates

Interest payments: SGB interest is taxed according to income tax slab rates.

Bonds and State Development Loans (SDL) taxation

Interest income: Interest credited to the bank account is taxed as “income from other sources” according to income tax slab rates. No Tax Deducted at Source (TDS) applies on G-sec interest payments.

Capital gains from price appreciation: Long Term Capital Gains (held more than 12 months): 12.5% flat rate Short Term Capital Gains (held within 12 months): Tax applies according to income tax slab rates

Long Term Capital Gains (held more than 12 months): 12.5% flat rate

Short Term Capital Gains (held within 12 months): Tax applies according to income tax slab rates

T-bills taxation

T-bills are bought at a discount and redeemed at full value at maturity. The profit is considered STCG and taxed according to the income tax slab rates.