Budget 2026: Expert suggests reducing holding period for gold funds and physical gold to 1 year

As gold prices continue to hover near record highs and uncertainty clouds global markets, Indian investors are once again turning to gold as a haven.

One of the biggest concerns is the uneven treatment of different gold investment options under capital gains tax laws. Currently, gold ETFs become long-term after just one year, while physical gold and gold mutual funds are only considered long-term assets if they are held for more than two years.

Retail investors using SIPs are most affected. In order to put gold funds and physical gold on level with gold exchange-traded funds (ETFs), investor organisations and market participants are now pushing the government to shorten the holding time for both to one year.

"There is a disparity between the holding period to qualify as a long-term asset for capital gains tax for gold funds and physical gold (2 years) versus Gold ETFs (1 year). Retail investors who are investing in gold funds via SIP, for example, even for 8 years and sell it, have to pay tax as per slab rates on the SIPs that have been invested in the previous 2 years. So, holding period for gold funds and physical gold should be reduced to 1 year to qualify as a long-term asset," said Ronak Morjaria, Partner at ValueCurve Financial Services.

Another major demand ahead of the Budget is the revival of Sovereign Gold Bonds (SGBs). The government has not announced any new SGB tranches recently, disappointing investors who saw the product as one of the most tax-efficient ways to invest in gold.

"Also, the government should consider restarting SGBs, as that was one of the best ways to earn tax-free returns on Gold," added Ronak Morjaria.

When was the last SGB issued?

The last SGB was issued in February 2024 (2023-24 Series IV) priced at ₹6,263 per gram. The discontinuation of SGB was announced by the Government of India, and Finance Minister Nirmala Sitharaman confirmed it during a post-budget briefing for the Union Budget 2025.

The scheme was launched in November 2015 under the Gold Monetisation Scheme, and existing bonds remain valid, with premature redemptions (after 5 years) and maturities (after 8 years).

In addition to providing investors with exposure to gold prices, SGBs offered 2.5% annual interest and totally tax-free capital gains upon maturity.