Sovereign Gold Bonds New Tax Rules Explained

Sovereign Gold Bonds (SGBs) have long been one of the most popular ways to invest in gold in India. They offered price appreciation linked to gold, extra interest income, and a big tax benefit at maturity. That changes after the Union Budget 2026.

The government has revised the tax rules for SGBs to discourage trading in the secondary market and push investors towards long-term holding through primary issues. If you already hold SGBs or are planning to invest, here is everything you need to know in simple terms.

What are Sovereign Gold Bonds and Why People Invest in Them

Sovereign Gold Bonds are issued by the RBI on behalf of the Government of India. Each bond represents one gram of gold. Investors like SGBs because: 

• They track gold prices without storage risk
• They pay 2.5 percent annual interest 
• They are backed by the government
•  They earlier offered tax-free capital gains at maturity

Investors could redeem SGBs in two ways. The first was by holding the bond till its full 8-year maturity. The second was by using the RBI’s early redemption option after completing 5 years. While the interest part has always been taxable, the major attraction was that capital gains on both these exits were tax free earlier. Budget 2026 has changed this.

The Big Budget 2026 Change Explained

From April 1, 2026, the tax treatment of SGBs depends on how you bought them and when you exit. The government has removed the blanket tax-free status that applied to everyone earlier.

If You Bought SGBs Directly From RBI (Primary Market)

If you purchased SGBs during RBI issues through banks, brokers, post offices, or RBI Retail Direct, and you hold them till the full 8-year maturity, your capital gains will remain completely tax free. This benefit continues even after Budget 2026.

If You Bought SGBs From Stock Exchange (Secondary Market)

If you bought SGBs from NSE or BSE, your gains will now be taxable even if you hold them till maturity. Capital gains will be taxed at 12.5 percent long-term capital gains rate, without indexation. This applies to redemptions or sales happening after April 1, 2026.

What If You Sell or Redeem SGBs Before April 1, 2026

If you sell or redeem your Sovereign Gold Bonds before April 1, 2026, the old tax rules will continue to apply. This means the Budget 2026 changes will not affect you.

How tax works if you exit before April 1, 2026

So if you are eligible for redemption through the RBI’s official 5-year window before April 1, 2026, this is your last opportunity to exit without paying capital gains tax.

Once the redemption or sale date crosses April 1, 2026, the new tax rules kick in, and the tax-free benefit will be available only to investors who bought SGBs at issue and hold them till the full 8-year maturity. This makes the timing of exit extremely important for existing SGB holders.

Final Tax-Free Exit Opportunity Before April 2026

Some SGB series are completing 5 years in early 2026. These investors get one last chance to exit tax-free under old rules.

Eligible SGB series for tax-free early redemption

Capital gains on these redemptions will remain tax-free if completed before April 1, 2026.

Tax on SGB Interest: No Change at All

One common confusion is about interest taxation. The 2.5 percent annual interest on SGBs has never been tax free. It is added to your total income and taxed as per your income tax slab under Income from Other Sources.

There is no TDS, so you receive the full interest amount, but you must declare it while filing your income tax return. Budget 2026 has not changed this rule.

Summary of SGB Tax Rules After Budget 2026

Investors who buy Sovereign Gold Bonds directly from the RBI and hold them till the full 8-year maturity will continue to enjoy tax-free capital gains.

If you exit SGBs using the RBI’s 5-year redemption window after April 1, 2026, the capital gains will be taxable, even if you were an original subscriber. The tax will depend on your holding period and will be charged as long-term or short-term capital gains.

Investors who buy SGBs from the stock exchange will no longer get tax-free capital gains, even if they hold the bonds till maturity. Any gains in such cases will be taxed as capital gains.

In all scenarios, the 2.5 percent annual interest earned on SGBs remains taxable as per your income tax slab.

Disclaimer:

The content is meant for education and general information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. The securities quoted are exemplary and are not a recommendation. This in no way is to be construed as financial advice or a recommendation to invest in any specific stock or financial instrument. Readers are encouraged to verify the exact numbers and financial data from official sources such as company filings, earnings reports, and financial news platforms and to conduct their own research, and consult with a registered financial advisor before making any investment decisions. All disputes in relation to the content would not have access to an exchange investor redressal forum or arbitration mechanism. INDmoney Global (IFSC) Private Limited,Registered office address: Office No. 507, 5th Floor, Pragya II, Block 15-C1, Zone-1, Road No. 11, Processing Area, GIFT SEZ, GIFT City, Gandhinagar – 382355.