Capital Gains Tax on Sovereign Gold Bonds (SGB) from 1st April 2026

As proposed in Budget 2026, the tax treatment of Sovereign Gold Bonds (SGBs) will change from 1st April 2026. The capital gains tax exemption on redemption will now apply only to the original subscriber who holds the SGB until maturity. Investors who acquire SGBs through secondary market transactions, transfers, or any other means will have to pay capital gains tax on the redemption value.

SGB Taxation - Key Highlights

• SGB taxation after 1st April 2026: Capital gains on redemption are exempt only for original subscribers who hold SGB till maturity.
• LTCG on SGB: Gains from SGBs held for more than 12 months are taxed at 12.5%.
• STCG on SGB: Gains from SGBs held up to 12 months are taxed at the applicable income tax slab rate.
• Secondary market SGB taxation: SGBs bought from the secondary market are not eligible for capital gains exemption on redemption.

What are Sovereign Gold Bonds (SGBs)?

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold, issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They serve as an alternative to holding physical gold, allowing investors to benefit from capital appreciation without the risks of storage or making charges.

SGB Taxation Rules before Budget 2026

SGBs were considered as the most tax efficient investment options as complete capital gains were not taxed on SGBs held till maturity irrespective of them being bought during original issue or from the secondary market. 

• Capital gains on SGBs held till redemption were completely exempt. 
• Capital gains on SGBs sold before redemption are taxed as LTCG at 12.5%.
• Interest at 2.5% was taxable as income from other sources at applicable slab rates. 

Budget 2026 Changes in SGB Taxation

While capital gains exemption on redemption continues, it is now available only to investors who subscribed to the original issue and hold SGBs till redemption. 

• Investors buying SGBs from the secondary market will have to pay capital gains tax even if SGBs are held till redemption. 
• Investors buying SGBs from the secondary market and selling before maturity will also have to pay capital gains tax. 
• The interest of 2.5% continues to be taxed as income from other sources at applicable slab rates. 

Capital Gain Tax on SGB After Budget 2026

1. Tax Exemption on SGBs Held Till Maturity

The SGBs bought directly from RBI through initial issue and held till redemption i.e., 5th to 8th year will benefit from a complete exemption on capital gains. So yes, capital gains exemption on SGBs is still available after Budget 2026 in this particular case. 

However, SGBs bought through the secondary market will not be eligible for capital gains exemption even if held till maturity. 

2. Tax on SGBs Sold Before Maturity

No exemption on capital gains from SGBs sold before redemption. They will be liable to pay capital gains tax based on their holding period. 

SGB Capital Gains Tax Pre & Post Budget 2026

The below table outlines the capital gains taxation of SGBs before and after Budget 2026

Tax on Interest Earned from SGB

Investing in SGBs not only gives capital appreciation but also an interest of 2.5%. However, this interest will be taxed as income from other sources at applicable slab rates. This continues to be the same as there were no changes in Budget 2026 regarding interest taxation. 

Capital Gain Tax on SGB Calculation

The impact of Budget 2026 capital gains taxation on SGBs can be understood through the below table:

Therefore, the taxpayer who bought SGB through the secondary market and held it till redemption will have a tax liability of Rs. 3,12,500 as per Budget 2026 changes. Whereas, previously his entire gains would have been exempt making his tax liability zero. 

Conclusion

While SGBs continue to have complete tax exemptions, it is now limited only to those who subscribed to the original SGB issue and held it till maturity. While all other SGB investors now have to pay capital gains tax post Budget 2026.