Tax Implications on Government Securities (G-Secs)

What are the tax implications on G-Secs?

The tax implications on Government Securities (G-Secs) vary based on the type of G-Sec and the duration of the holding period.
  • Short-term Capital Gains (STCG): If the G-Sec is sold within a short duration, the gains are classified as STCG and taxed at your applicable income tax slab rate.
  • Long-term Capital Gains (LTCG): If the G-Sec is held for a longer duration before selling, the gains are classified as LTCG and taxed at a lower rate of 10%.
For example, consider you purchased a G-Sec for ₹100 and sold it for ₹110 after a year, resulting in an LTCG of ₹10. This gain will be taxed at 10%, amounting to ₹1. In contrast, if the G-Sec was sold within six months, the STCG of ₹10 would be taxed at your income tax slab rate, which might be higher than 10%.

Moreover, the interest earned on the G-Sec is classified under 'Income from Other Sources' and taxed according to your applicable slab rate.

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