Capital Gain Tax on Sovereign Gold Bond (SGB) After Budget 2026

As per Budget 2026, capital gains on redemption of SGB is excluded from taxation only to original subscribers holding SGBs till redemption. Every other investor will have to pay capital gains tax on their redemption value. 

Budget 2026 Update

• Budget 2026 proposed to provide capital gains exemption on SGBs only to original subscribers who hold SGBs till redemption.
• Investors buying SGBs from the secondary market won't be eligible for exemption even if held till redemption.
• Discontinuity in holding due to reason other than sale, will also not qualify for exclusion from capital gain taxation.

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 SGBs Held Till Redemption

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 SGB Sold Before Redemption

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 Calculation on SGB

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.