Sovereign Gold Bond Tax Rules: The government has suggested a significant shift in the tax exemption policy for Sovereign Gold Bonds (SGBs) in the Union Budget 2026. Typically, Sovereign Gold Bonds are seen as tax-free investment options, but the new changes introduced in the House have altered this view. The exemption from Capital Gains Tax will no longer apply to everyone. This adjustment in SGB regulations will have a direct effect on investors’ finances. Let’s dive into the details.
Now discount will be available only on original issue
As per the budget document, the capital gains exemption will be limited to investors who applied directly to the Reserve Bank of India (RBI) at the time the bonds were issued. This means that if you bought the bonds during the original issue and kept them until maturity (8 years), you won’t have to pay any tax on the profits. This change will significantly affect those who previously bought bonds from others via the stock exchange.
Why did investors buy bonds from the secondary market?
It’s important to highlight that many investors acquire Sovereign Gold Bonds through stock exchanges, looking for lower prices, and they used to enjoy the capital gains tax exemption. However, the new proposal in Budget 2026 has entirely removed this purchasing method for bonds. The government clarifies that if you obtained the bonds from someone else or bought them through the stock exchange, it won’t count as an original subscription.
Tax will also have to be paid on free-redemption of SGB
Additionally, the government has included the tax exemption on the free redemption of Sovereign Gold Bonds in the tax framework. Under the new proposal, investors who redeem Sovereign Gold Bonds before they mature will no longer benefit from the tax exemption. Meanwhile, the 2.5% annual interest on SGBs is already subject to tax.
