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Sovereign Gold Bond Tax Rules Tighten April 1
1 Feb
Summary
- Capital gains tax exemption for SGBs ends for secondary buyers.
- Only primary subscribers holding bonds till maturity get exemption.
- Annual 2.5% interest on SGBs remains taxable for all investors.
As of April 1, 2026, a significant change will impact Sovereign Gold Bond (SGB) investors. The proposed Union budget for FY27 withdraws the capital gains tax exemption for those acquiring SGBs from the secondary market. This means investors who did not subscribe directly during the initial Reserve Bank of India (RBI) issuance window, and instead purchased bonds later from other investors or exchanges, will face capital gains tax upon redemption.
This amendment to the Income Tax Act means only primary subscribers who hold their SGBs continuously until maturity will continue to enjoy full exemption from capital gains tax. The 2.5% annual interest paid on SGBs, however, remains taxable for all investors regardless of how they acquired the bonds. This development affects a large number of investors, particularly as fresh SGB issuances have ceased, leading to most trading occurring on the secondary market.
The surge in gold prices, which have seen substantial increases over the past year and five years, has raised fiscal concerns for the government due to higher payouts on SGB redemptions. Consequently, the government is introducing this tax on secondary market purchases, even for bonds held to maturity. Investors who bought SGBs in the secondary market will now be subject to long-term capital gains tax at 12.5% or short-term capital gains at slab rates.
