New Sovereign Gold Bond rule proposed: Capital Gains tax exemption only on original issue held till maturity

Union Budget 2026 has proposed to revise the Sovereign Gold Bond (SGB) taxation rules for investors who are not subscribed to the original issue. According to the proposal, capital gains tax exemption will only be available to taxpayers who subscribed to the SGB at the time of original issue and held continuously until maturity till redemption.

The "Annexure B" of the Budget Speech 2026 document says the following about SGB taxation:

Impact explained

The Budget proposal is set to impact taxpayers who invested in SGBs through the secondary market.

The announcement in Budget 2026 is a change in the previously understood taxation of capital gains from SGBs. As per the original rule, only the interest on the Sovereign Gold Bonds was taxable, while there was no capital gains tax on maturity proceeds. The SGB scheme offers 2.5% interest per annum to the investor.

However, section 70(1)(x) of the Income-tax Act, 2025 has now been proposed to be amended to clarify "that the exemption from capital gains tax shall be available only where the Sovereign Gold Bond is subscribed to by an individual at the time of original issue and is held continuously until redemption on maturity."

The exemption will no longer apply to Sovereign Gold Bonds acquired through transfer or purchase in the secondary market.

"No, the exemption shall not apply to Sovereign Gold Bonds acquired through transfer or purchase in the secondary market. The exemption is restricted to bonds subscribed to by an individual at the time of original issue. This was also clarified by the Department of Economic Affairs in its OM dated 06.12.2022," the Income-tax Department said in a FAQ.

Further, exemption will also not be available in case of premature redemption.

Here's how the taxability will work now:

“In her Union Budget 2026‑27 address, Finance Minister Nirmala Sitharaman proposed a key change to the tax treatment of Sovereign Gold Bonds. She stated that the capital gains exemption will now be available only to individuals who subscribe to the bonds at the time of the original issue and hold them continuously until maturity. The Budget also specified that this exemption will apply uniformly across all issuances of Sovereign Gold Bonds by the Reserve Bank of India, ensuring a consistent and standardised tax benefit for eligible investors,” said Rajarshi Dasgupta, Executive Director, Tax, AQUILAW comments.