SGB Premature Redemption on Feb 11 at ₹15,440: Tax Update After Budget 2026

SGB premature redemption for the 2019–20 Series IX and 2020–21 Series V tranches falls due today, with the redemption price fixed at ₹15,440 per unit. Investors sitting on nearly 3x to 3.8x gains now face a key question: will these gains be taxable after the changes announced in Budget 2026–27?

The answer depends on how and when the sovereign gold bond (SGB) was purchased.

RBI SGB Redemption Price and Returns Details

The Reserve Bank of India has set the premature redemption price at ₹15,440 per unit.

Issue price comparison:

• 2019–20 Series IX: ₹4,070 per gram
• 2020–21 Series V: ₹5,284 per gram
  

These returns exclude the 2.5% annual interest, one of the key SGB benefits.

The original issue dates were February 11, 2020 and August 11, 2020. Investors had to apply for the sovereign gold bond early redemption between January 9 and February 2 by informing their bank or depository in advance.

SGB Premature Redemption Tax Rules Till March 31, 2026

Under the current sovereign gold bond tax framework, capital gains after five years remain tax-free if investors redeem through the RBI’s premature redemption window.

To qualify:

• The bond must complete five years
• The investor must apply within the RBI redemption window
• The bank or depository must be informed at least one month in advance

In such cases, no long-term capital gain tax is payable.

Budget 2026–27 SGB Changes: Who Will Pay Capital Gains?

From April 1, 2026, the rules change.

As per Budget 2026 SGB provisions, only primary investors, those who subscribed at the time of issuance, will continue to enjoy tax-free maturity proceeds.

Investors who bought through the secondary market SGB route will not get tax exemption, even if they:

• Hold the bonds for 5 years
• Redeem at maturity

Future SGB gains will largely be taxable for secondary market buyers.

Final Tax-Free Window for Secondary Market SGB Investors

Experts note that only a limited number of tranches qualify before the rule change.

Out of 28 SGB series, only four complete five years and have a premature redemption window before March 31, 2026. This gives eligible secondary-market SGB investors a final opportunity to realise tax-free gains.

After this period, capital gains will be taxable based on revised provisions.

Sovereign Gold Bond Benefits and Liquidity Risks

Sovereign gold bonds offer:

• Sovereign backing
• 2.5% annual interest income
• Potential gold price appreciation

However, liquidity remains a drawback. With fresh issuances discontinued, trading volumes in the secondary market SGB segment may remain thin.

While tradable on exchanges, early exits can happen at a discount due to limited liquidity.

Key Takeaways

For investors considering SGB premature redemption, timing is critical. Those eligible under the current framework can exit tax-free before March 31, 2026.

After that, the Budget 2026–27 changes will restrict tax exemption mainly to original subscribers. Whether gains are exempt or taxable depends entirely on whether the bond was purchased in the primary issuance or the secondary market.

Source: https://www.moneycontrol.com

Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.