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

    • Related Articles

    • What are the tax implications of gifting stocks?

      Gifting stocks carries unique tax implications for both the person giving the gift (the Gifter) and the one receiving it (the Giftee). For the Gifter: Capital Gains: As outlined in the Income Tax Act, the transfer of a capital asset would typically ...

    • What are G-Secs or Government Securities?

      Government Securities, commonly known as G-Secs, are debt instruments issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They serve as a means for the government to borrow money for developmental and financial ...

    • Will my investment value increase on investing in G-Secs?

      Government Securities (G-Secs) offer stable, long-term returns backed by the Government of India. However, the actual value of your investment over time depends on factors like interest rates, holding period, and market conditions. How G-Sec ...

    • What is the interest rate on investing in G-Secs?

      The interest rate on Government Securities (G-Secs) is not fixed in advance but determined through periodic auctions conducted by the Reserve Bank of India (RBI). This rate—also known as the coupon—reflects multiple market-driven factors such as ...

    • Can I pledge G-Secs, T-Bills and SDLs through FYERS?

      Yes, you can pledge Government Securities (G-Secs) and Treasury Bills (T-Bills) through FYERS using our online Pledge portal. These instruments are classified as cash equivalents and typically carry minimal haircuts. However, SDLs (State Development ...