Capital gains tax on sovereign gold bonds: Experts highlight an issue for Budget 2025 to address

One such suggestion shared by Taxmann is around the taxation of sovereign gold bonds (SGB).

Experts at Taxmann have recommended that the capital gain provisions should not contain a reference to any particular year related to the sovereign gold bonds scheme.

As per section 47 of the Income-tax Act, redemption of SGBs issued by the RBI under the Sovereign Gold Bond Scheme, 2015 shall not be treated for capital gain.

However, the central government has issued a new SGB scheme for several years since 2015.

The experts further recommended a similar amendment under the “Fourth proviso to Section 48, which provides the benefit of indexation while computing long-term capital gain arising from the transfer of Sovereign Gold Bond.”

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SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They offer investors an alternative to physical gold.

SGBs are denominated in grams of gold. While the RBI has not issued new tranches of SGBs in the current financial year, investors have been attracted to this scheme due to several features, including tax benefits.

For instance, selling physical gold is subject to capital gains taxation. But SGBs are free from capital gains at the time of redemption.

In other words, you don’t have to pay any capital gains tax on redeeming SGBs after maturity. However, the annual interest earned from SGBs is subject to tax.