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  5. Sovereign Gold Bond tax changes 2026: SGB tax rate, old vs new rules, applicable date, facts & FAQs

Personal Finance News

Sovereign Gold Bond tax changes 2026: SGB tax rate, old vs new rules, applicable date, facts & FAQs

rajeev kumar
By Rajeev Kumar

6 min read | Updated on February 02, 2026, 11:44 IST

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SUMMARY

Till now, the taxability of capital gains from Sovereign Gold Bonds acquired in secondary markets was subject to interpretation. While the Finance Ministry treated such gains as taxable, many believed they were exempted. Budget 2026 has cleared the confusion.

SGB tax rules 2026

Here's the new SGB rules and facts that you should know. | Image source: Shutterstock

If you have acquired your Sovereign Gold Bonds (SGBs) through the secondary market, you will not get tax exemption on capital gains on redeeming after maturity from FY 2026-27, according to the Finance Bill 2026. While this development has surprised many SGB investors who purchased their bonds in the secondary markets, it has also led to several rumours and confusion about the new SGB taxation rule.
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This article aims to explain everything you should know about SGB taxation under the new rules, including FAQs, comparison tables, and more.

What has changed?

Till now, the taxability of capital gains from SGBs acquired in secondary markets was subject to interpretation. While the Finance Ministry treated such gains as taxable, many believed they were exempted. According to the Income-tax Department, the Department of Economic Affairs had clarified the issue of taxation of SGBs procured through secondary markets in its Office Memorandum dated 06.12.2022.

The Finance Bill has proposed to amend the criteria for claiming capital gains tax exemption on SGBs under Section 70(1)(x) of the New Income Tax Act, 2025.

The Budget Memorandum 2026 says:

In order to ensure uniform application of the exemption across all such issuances and to align the provision with its intended scope, it is proposed to amend section 70(1)(x) to provide that the exemption shall be available only where the Sovereign Gold Bond is subscribed to by a subscriber at the time of original issue and is held continuously until redemption on maturity, for all Sovereign Gold Bonds issued by the Reserve Bank of India from time to time

"The Income Tax Act, 2025, significantly tightens the exemption criteria. Under the new law, the exemption is no longer attached solely to the instrument (the bond) upon redemption, but rather to the behavior of the investor (must be the original subscriber and must hold until maturity). These changes apply uniformly to all series of SGBs issued by the RBI," said CA Dr Suresh Surana.

What is the applicable date for the new rule?

The new rule will come into effect from April 1, 2026. And it will apply in relation to the Tax Year 2026-27 and subsequent tax years.

What are the conditions for tax exemption now?

Dr Surana said that to qualify for tax exemption on redemption, the following specific conditions must be met:

Original subscriber only: The exemption is available only if the SGB was subscribed to by an individual at the time of the original issue. Bonds acquired through secondary market transactions (transfer or purchase) are not eligible for this exemption.
Held until maturity: The individual must hold the bond continuously until redemption on maturity. Premature redemption, even if done after the completion of the prescribed lock-in period, will not qualify for the exemption and will be taxable.
Uniform application: The amendment proposed in Finance Bill 2026 will apply uniformly to all series of SGBs issued by the Reserve Bank of India from time to time.

New vs Old rule: Comparative analysis of the capital gains tax exemption on SGBs

The following is a comparative analysis of the capital gains tax exemption on SGBs under the old and the new proposed rule, based on inputs by Dr Surana.

FeatureIncome Tax Act, 1961 (Existing Regime)Income Tax Act, 2025 (New Regime via Finance Bill 2026)
Relevant sectionSection 47(viic)Section 70(1)(x)
Eligible assesseeIndividualIndividual
Nature of transaction exemptedTransfer by way of redemption of Sovereign Gold Bond issued by RBITransfer by way of redemption of Sovereign Gold Bond issued by RBI
Condition: mode of acquisitionBroad reference to bonds issued under the scheme; no explicit restriction requiring original subscriptionStrict restriction: exemption available only if the bond was subscribed at original issue
Condition: holding periodExemption for “redemption”; no statutory requirement to hold from issue to maturityStrict restriction: bond must be continuously held from original issue until maturity
Premature redemptionCertain 5‑year redemption windows treated as exempt under broader readingTaxable: premature redemption not eligible for exemption
Secondary market purchaseTaxability depended on interpretation; departmental view (OM 06.12.2022) treated it as taxableTaxable: exemption not available for SGBs purchased in secondary market
Effective date of changeNot applicable1 April 2026 (for Tax Year 2026‑27 onwards)

Sovereign Gold Bond Taxation: FAQs

Has Budget 2026 changed the taxation rules for SGBs purchased through the secondary market in view of rising gold prices?

No. Budget 2026 has not changed any tax provision. It has only clarified the position that was apparently misinterpreted previously. As per the Income-tax department, a clarification on this issue was also issued in December 2022, much before the gold price started rising and reached its current level.

"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 tax department says.

Is tax exemption available in case of premature redemption?

No. Premature redemption, even after completion of the prescribed lock-in period, will not be eligible for exemption.

What is the long-term capital gains tax rate for SGBs?

The long-term capital gains (LTCG) tax for SGB 12.5%. There is no indexation benefit.

Do you have to pay LTCG tax if you redeemed your SGB after maturity in FY 2025-26?

No. As per the Budget Memorandum, the new rule will be effective from FY 2026-27, starting on April 1, 2026. And it will apply when filing returns for Tax Year 2026-27 in the year 2027.

"The amendment shall take effect from the 1st day of April, 2026 and shall apply in relation to the tax year 2026-27 and subsequent tax years," the Income-tax Department says.

The above means that capital gains on bonds maturing in FY 2026-27 and later will be taxed as per the new rule.

Is there any change in taxation of SGBs purchased through RBI and Banks?

No, there is no change in taxation rules for SGBs purchased through RBI and banks. However, you need to hold the bonds till maturity to enjoy tax exemption on capital gains.

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About The Author

rajeev kumar
Rajeev Kumar is a Deputy Editor at Upstox, and covers personal finance stories. In over 11 years as a journalist, he has written over 2,000 articles on topics like income tax, mutual funds, credit cards, insurance, investing, savings, and pension. He has previously worked with organisations like 1% Club, The Financial Express, Zee Business and Hindustan Times.

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