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  5. I sold Sovereign Gold Bonds through my broker after the premature redemption window. Do I owe tax?

Personal Finance News

I sold Sovereign Gold Bonds through my broker after the premature redemption window. Do I owe tax?

balwant jain
By Balwant Jain

3 min read | Updated on March 20, 2026, 16:22 IST

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SUMMARY

The exemption is available to individual investors if the bonds are tendered for early redemption after the bonds have run for five years, and is not available in case the bonds are sold in the secondary market, even after completion of five years.

Tax on SGB sale after missing premature redemption

There will be tax on selling SGB in secondary market after missing premature redemption window. | Image source: Shutterstock

From April 1, 2026, capital gains tax exemption on sovereign gold bonds (SGB) will be available only on redemption by original subscribers after 8 years. As the new rules come into effect from next month, many subscribers are not sure about tax implications if they have already sold their units through the secondary market. Today's Q&A answers one such taxpayer's query:
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Question: I purchased 10 units of SGB VIII ISSUE in November 2020 at ₹5127 each. I couldn't redeem in November 2025 when the early redemption window was open. I sold 2 units at ₹15,870 each on March 5 through my broker. Whether I have to pay LTCG for this income, as I have sold my SGBs after five years?
Answer: The tenure of various tranches of Sovereign Gold Bonds is eight years, but an investor can tender them for early redemption after five years to the RBI on the interest payment dates.

The SGB 2020-21 Series VIII was issued on November 18, 2020, with a final maturity date in November 2028. It was eligible for premature redemption on November 18, 2025.

The liability to pay capital gains tax arises when one transfers a capital asset. As per section 47 of the Income-tax Act 1961, early redemption of SGB bonds with the RBI is not treated as a transfer. Since early redemption with RBI is not treated as a transfer, any appreciation realised at the time of redemption is not to be treated as capital gains, making such appreciation tax-free in the hands of the individual taxpayer.

This exemption is available to individual investors if the bonds are tendered for early redemption after the bonds have run for five years, and is not available in case the bonds are sold in the secondary market, even after completion of five years.

Since you missed the opportunity to tender the gold bonds for early redemption when the window was open and have sold in the open market, you will have to pay tax at a flat rate of 12.50% on the profit of ₹21,486 realised on the sale of two bonds.

For FY 2026-27, the law is proposed to be changed by the latest budget, providing that the exemption from long-term capital gains will be available only to the original subscribers who hold the bonds till maturity of eight years.
Have a personal finance and income tax query? We will try to get them answered by experts. Write to rajeev.kumar@rksv.in
Disclaimer: The views and opinions expressed above are those of respective experts/commentators and do not reflect the views of Upstox. The above Q&A is only for informational purposes and should not be considered investment or tax advice from Upstox. Please consult a tax expert for your complex tax problems.

About The Author

balwant jain
Balwant Jain is a Mumbai-based tax and investment expert.

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