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  5. Sovereign Gold Bond profits: How to report in Income Tax Return for AY 2026-27

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Sovereign Gold Bond profits: How to report in Income Tax Return for AY 2026-27

image Sangeeta Ojha
By Sangeeta Ojha

4 min read | Updated on July 14, 2026, 07:26 IST

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SUMMARY

The tax treatment depends on whether the income is interest or capital gains, and how the Sovereign Gold Bonds (SGBs) were disposed of

Sovereign Gold Bond profits

The annual 2.5% interest earned on SGBs is fully taxable, even though the bonds themselves enjoy certain tax benefits. | Image: Shutterstock.

Income tax returns (ITR) for Assessment Year (AY) 2026-2027 must be filed by July 31st, so taxpayers are gathering paperwork and completing their returns. Even though Sovereign Gold Bonds (SGBs) still provide tax-efficient returns, many investors are still unsure about how to include gains and interest in their ITR, particularly in light of the tax adjustments made in Budget 2026.
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It is important to note that the Budget 2026 announcements related to SGB will apply from the next filing season (AY 2027-28). Therefore, taxpayers filing returns for AY 2026-27 should follow the existing tax rules.

How are SGBs reported in the ITR?

Sovereign Gold Bond (SGB) transactions should be reported under the Capital Gains (Schedule CG) section of ITR-1, ITR-2, ITR-3 or ITR-4, wherever applicable. The reporting depends on how the bonds were disposed of, whether they were redeemed with the Reserve Bank of India (RBI) on maturity or sold on a recognised stock exchange before maturity.

CA Abhishek Soni, CEO & Co-founder, Tax2win explained how to report gold bond profits in in ITR.

ITR-1: If you earn interest on Sovereign Gold Bonds (SGBs), it should be reported under Income from Other Sources. However, if you sell SGBs on the stock exchange and earn capital gains, you cannot use ITR-1, as this form does not permit reporting of such capital gains. If you redeem the bonds with RBI on maturity, no reporting is generally required, although you may choose to disclose the exempt amount under Exempt Income.

**ITR-2: **SGB interest should be reported in Schedule OS (Income from Other Sources). If you sell the bonds on the stock exchange before maturity, the resulting gain or loss should be reported in Schedule CG (Capital Gains). In case of redemption with RBI on maturity, the exempt amount is generally not required to be reported, though taxpayers may voluntarily disclose it in Schedule EI (Exempt Income).

ITR-3: Similar to ITR-2, SGB interest is reported in Schedule OS, while gains or losses from the sale of SGBs on the stock exchange are reported in Schedule CG. If the bonds are redeemed with RBI on maturity, reporting is generally not mandatory, but the exempt amount may be disclosed in Schedule EI if desired.
ITR-4: Interest earned on SGBs should be included under Income from Other Sources. However, ITR-4 cannot be used if you have taxable capital gains from the sale of SGBs on the stock exchange (except for the limited capital gains specifically allowed under the form). Therefore, taxpayers with such gains must file a different ITR form.
SGB tax treatment

The tax treatment depends on whether the income is interest or capital gains, and how the bonds were disposed of.

The annual 2.5% interest earned on SGBs is fully taxable, even though the bonds themselves enjoy certain tax benefits.

The interest is taxed in accordance with the investor's applicable income tax bracket and should be recorded under Schedule OS (Income from Other Sources). Because government securities are excluded from TDS under Section 193 of the Income-tax Act, there is no tax deducted at source (TDS) on this interest.

At maturity, redemption

According to the regulations in effect for AY 2026-2027, capital gains are not subject to taxation if an investor subscribed to the bond in the initial RBI offer and retains it until its scheduled maturity.

It is not included in taxable income since there is no taxable capital gain. Taxpayers may report the exempt gain in Schedule EI (Exempt Income) if appropriate.

SGB sale prior to maturity

The profits are taxable and must be reported under Schedule CG (Capital profits) if the bond is sold on a recognised stock exchange prior to maturity. The applicable tax depends on the holding period:

Short-term capital gains (held for up to 12 months): Taxed at the investor's applicable income tax slab rate.
Long-term capital gains (held for more than 12 months): Taxed at 12.5%, subject to the applicable provisions.

What Budget 2026 changed

A significant modification in Budget 2026 is that the capital gains exemption on redemption will only be available to original subscribers who buy SGBs at the time of issuance and keep them until maturity.

This exemption will not apply to investors who purchase SGBs from the secondary market. Any profits from the redemption of these bonds are subject to taxation and must be recorded under Schedule CG (Capital Gains).

The change will take effect in the Assessment Year 2027-2028.

Have an ITR filing query for AY 2026-27? We will try to get them answered by experts. Write to sangeeta.ojha@rksv.in
For all personal finance updates, visit here

About The Author

image Sangeeta Ojha
Sangeeta Ojha is a business and finance journalist with experience across leading media platforms like Mint and India Today. She has built a reputation for covering a wide range of personal finance topics, including income tax, mutual funds, insurance, savings and investing.

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