Sovereign Gold Bonds: New Capital Gains Tax Rules in Budget 2026-27

Sovereign Gold Bond (SGB) taxation has been revised under Budget 2026-27.

Until now, capital gains arising on redemption of sovereign gold bonds with the RBI were exempt from tax, irrespective of whether the bonds were purchased in the primary market or the secondary market.

From April 1, 2026, the capital gains exemption will apply only if:

• The bond was subscribed at original issuance (primary market), and
• The bond is held continuously from the date of issue until redemption at maturity (8 years).

If either of these conditions is not satisfied, the redemption will be treated as a transfer for tax purposes, and capital gains tax will apply.

The amendment also clarifies that:

• Bonds acquired through purchase in the secondary market do not qualify for exemption.
• Premature redemption, even after completion of the lock-in period, is not eligible for exemption.

Difference Between Primary Market and Secondary Market for SGB Taxation

The revised rules make the purchase method critical. Here is how taxation differs:

Particulars	Primary Market (Original Issue)	Secondary Market (Exchange Purchase)
Where purchased	Subscribed directly from RBI at issuance	Bought on the stock exchange through a broker
Capital gains exemption at maturity	Available only if held continuously for 8 years	Not available
Premature redemption eligibility	Taxable from April 1, 2026	Taxable
Sale on the exchange	Taxable	Taxable
Capital gains classification	Based on the holding period, if the exemption conditions are not met	Based on the holding period
Long-term capital gains tax	12.5% (if taxable)	12.5%
Short-term capital gains tax	Slab rate	Slab rate

Want to understand the primary vs. secondary SGB market? 

Sovereign Gold Bond Taxation: Before and After Budget 2026

The amendment modifies Section 70 (Transactions Not Regarded as Transfer) under the Income Tax Act, 2025. Capital gains exemption on redemption of Sovereign Gold Bonds:

Before Budget 2026 (Up to Jan 31, 2026)

Purchase Mode	Sold in the Secondary Market	Premature Redemption with RBI	Redemption at Maturity
Bought in the Secondary Market	Taxable	Exempt	Exempt
Bought at Primary Issuance	Taxable	Exempt	Exempt

Transitional Period (Feb 1, 2026 – March 31, 2026)

Purchase Mode	Sold in the Secondary Market	Premature Redemption with RBI	Redemption at Maturity
Bought in the Secondary Market	Taxable	Exempt*	Exempt
Bought at Primary Issuance	Taxable	Exempt	Exempt

On or after April 1, 2026

Purchase Mode	Sold in the Secondary Market	Premature Redemption with RBI	Redemption at Maturity
Bought in the Secondary Market	Taxable	Taxable	Taxable
Bought at Primary Issuance	Taxable	Taxable	Exempt

How Capital Gains Will Be Taxed on SGBs Now?

Once a Sovereign Gold Bond transaction does not qualify for exemption under the revised rules, capital gains will be taxed based on the holding period.

1. Short-Term Capital Gain Tax (STCG)

If the holding period is less than 12 months, gains are treated as short-term capital gains.

These are taxed at the investor’s applicable income tax slab rate.

2. Long-Term Capital Gains (LTCG)

If the holding period exceeds 12 months, gains are treated as long-term capital gains.

These are taxed at 12.5% (without indexation benefits) under current capital gains provisions.

This applies to:

• Bonds purchased in the secondary market
• Bonds sold on the exchange before maturity
• Bonds subscribed at primary issuance but redeemed prematurely (after April 1, 2026)

Tax on SGB Interest

The annual interest paid on sovereign gold bonds (currently 2.5% per annum on issue price) continues to be:

• Fully taxable
• Added to total income
• Taxed as per the investor’s income slab

Interest income does not qualify as capital gains and does not receive preferential tax treatment.

What is the Eligibility of the Final Tax-Free Exit Window Before April 1, 2026?

Certain Sovereign Gold Bond (SGB) tranches complete 5 years in early 2026. According to the available issuance schedules, only a limited number of SGB series have redemption windows open before the effective date. Investors holding these specific tranches should verify:

• ISIN
• Maturity year
• Coupon date
• Redemption request window

Since this involves interpreting transitional provisions, investors should confirm their eligibility with their tax advisor before taking any action.

Eligible SGB Series for Early Redemption

SGB Tranche	Premature Redemption Date	Redemption Request Window
2020-21 Series VI	7 March 2026	5 Feb – 25 Feb 2026
2020-21 Series XII	9 March 2026	6 Feb – 27 Feb 2026
2019-20 Series X	11 March 2026	7 Feb – 2 March 2026
2019-20 Series IV	17 March 2026	13 Feb – 7 March 2026

Sovereign Gold Bond Taxation (Budget 2026-27) FAQs

Source: https://www.nism.ac.in

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