# Tax on Bonds, SGBs, REITs & InvITs

> Interest on bonds is taxed at slab rates. Sovereign gold bonds pay 2.5% interest that is taxable, but redemption by an individual at maturity is exempt from capital gains; selling SGBs on the exchange gives capital gains (12.5% if held over 12 months). Listed bonds held over 12 months are taxed at 12.5%; unlisted bonds and debentures are taxed at slab rates. REIT and InvIT distributions are taxed according to their component — interest, dividend, rent or capital repayment.

Practice: Trader & Investor Tax — https://www.industax.com/services/investor-tax/

Each REIT or InvIT distribution statement splits payouts into interest, dividend, rental income and repayment of capital, and each has different tax treatment. Dividends may be exempt depending on the trust's SPV tax regime, while repayment of capital can reduce cost or be taxed.

We read the distribution breakups and gain statements and report each component correctly.

## Key facts

| Item | Detail |
| --- | --- |
| Bond interest | Slab rates |
| SGB maturity redemption | Exempt for individuals |
| Listed bonds/SGB sale | 12.5% if held over 12 months |
| Unlisted bonds | Slab rates |
| REIT/InvIT units | Listed — 12 months for long-term |

## Who needs this

- Fixed-income and gold investors
- REIT and InvIT unitholders
- Retirees with bond portfolios

## What's included

- Interest and distribution analysis
- Capital gains computation
- ITR reporting

## Documents

- Interest certificates
- Trust distribution statements
- Demat transaction statements

## Process

1. **Collect** — Statements gathered.
2. **Classify** — Each component mapped to its head.
3. **Report** — Filed in the right schedules.

## FAQs

### Is SGB redemption before maturity tax-free?

Premature redemption with the RBI after five years is treated as redemption, and many view it as exempt for individuals; selling on the stock exchange is a transfer taxed as capital gains.

### Are tax-free bonds really tax-free?

Their interest is exempt, but gains on selling them in the market are taxable as capital gains.

### Is TDS deducted on bond interest?

Yes, on many listed and unlisted debentures above the threshold, unless an exemption applies or Form 15G/15H is given.

## Official sources

- incometaxindia.gov.in: https://www.incometaxindia.gov.in/

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Publisher: Indus Tax — CA-led tax and compliance firm (https://www.industax.com). Contact: info@industax.com, 9059139258.
This is general information, not advice for your specific facts.