What are the tax implications on G-Secs?

What are the tax implications on G-Secs?

When investing in Government Securities (G-Secs), you should be aware of two primary tax considerations: interest income and capital gains. The applicable tax treatment depends on your holding period and the type of income earned.

Types of tax on G-Secs

  • Interest income
    • Taxed as ‘Income from Other Sources’
    • Subject to your regular income tax slab rate
  • Capital gains
    • Short-Term Capital Gains (STCG): Gains from selling G-Secs within 12 months; taxed as per your income tax slab
    • Long-Term Capital Gains (LTCG): Gains from holding G-Secs for more than 12 months; taxed at 10% without indexation

Example

  • You buy a G-Sec at ₹100 and sell it at ₹110 after one year → ₹10 LTCG taxed at 10% = ₹1
  • If sold within six months → ₹10 STCG taxed as per your income bracket

What if...

ScenarioResolution
You're unsure of how to declare interestInclude it under ‘Income from Other Sources’ in your tax return.
You made capital gains on saleCheck the holding period to determine if it’s STCG or LTCG and apply relevant tax rate.
Maintain clear transaction records of purchase, sale date, and interest received to streamline your tax filing.

Last updated: 26 Jun 2025

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