SGB Tax Rule Change: People invest in large amounts in Sovereign Gold Bonds (SGB) for safe investment and good returns. SGB has also gained popularity due to its tax-free maturity income. However, in the 2026 Budget, Finance Minister Nirmala Sitharaman has launched a ‘surgical strike’ on the tax rules of Sovereign Gold Bonds, making the scheme less profitable for many investors. This is because there will be no more exemption from capital gains tax.
As per the 2026 Budget proposal, this tax exemption will now be applicable only to those investors who bought the bonds directly from the Reserve Bank of India (RBI) at the time of their initial issue, i.e. when the bonds were first issued, and held them till maturity. The biggest blow has been to investors who bought and sold gold bonds through the stock exchange (secondary market). According to the new rules, after April 1, 2026, if an investor redeems or matures bonds purchased through the secondary market, they will have to pay tax on the gains they make.
Why the tightening of the rules?
Market experts say that the government’s primary aim is to restrict the tax benefit only to those ‘original investors’ who provide funds directly to the government for a long period. Market experts say that many investors used to buy old gold bonds at a ‘discount’ on the stock exchange and avail double the benefit of full tax exemption after maturity. The government has taken this stringent step to eliminate this ‘arbitrage opportunity’. Now, the government wants to ensure that the tax benefit is available only to those who initially join the scheme.
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What will be the impact of tax changes on SGBs
If you have bought SGBs from other investors through stock exchanges (NSE/BSE), your returns will now be reduced. As per the rules effective from April 1, 2026, these bonds will now be treated as capital assets. If you sell them immediately after purchase, the gain will be added to your gross income and taxed as per your tax slab. If you hold them for a long period, you will have to pay LTCG tax. The withdrawal of the special tax exemption available earlier may also impact the liquidity and demand of these bonds in the secondary market.
One of the most popular gold-related schemes among Indian households, Sovereign Gold Bonds, has seen a major change. In the Budget, Finance Minister Nirmala Sitharaman announced a cap on the tax exemption available on these bonds. This means that gold bond investors will no longer be exempted from capital gains tax. According to the Budget 2026 document, this tax exemption will now be available only to investors who bought the bonds directly from the Reserve Bank of India (RBI) during their initial issue and held them till maturity. The decision is a major setback for investors who invested in gold bonds through secondary markets like stock exchanges.
So has the tax exemption been scrapped?
With significant changes being made to the tax rules for Sovereign Bonds (SGBs), many investors are now wondering whether the tax exemption on SGBs has now ended. The answer is, not entirely. The tax exemption will still be available, but after a lock-in period.
What were the previous rules for tax exemption on SGBs?
Earlier, if an individual held gold bonds till maturity (8 years), they were exempted from capital gains tax. In fact, this benefit was also applicable to those who bought the bonds not directly from the RBI but through the secondary market.
What has changed after Budget 2026?
As per the new proposal of the Finance Minister, exemption from capital gains tax will now be available only if these two conditions are met-
The investor must have bought the bond when it was first issued by the RBI (original issue).
The investor must have held the bond continuously from the date of issue till maturity.
If you have bought an old gold bond from another investor on a stock exchange (like NSE or BSE), then from now on you will have to pay tax on the profit earned after maturity. It is not enough to just hold the bond till maturity, when and from where you buy it is also important.
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Rs 1.25 lakh to be taxed on a profit of Rs 10 lakh
Let us see the changes that will come into effect from April 1 as per the budget provisions with an example. Suppose you bought a gold bond from RBI several years ago, and your neighbour bought a gold bond from the secondary market. So, suppose the price of gold has doubled over a few years, resulting in a profit of Rs 10 lakh for you and your neighbour.
How much tax will you pay:
Since you bought the bond directly from the RBI (at the time of issue) and held it till maturity, you will have to pay 0% tax on it. This means that the entire profit will go to you.
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How much tax will your neighbour have to pay?
If your neighbour had bought the same bond from the stock market and held it till maturity, they would not have had to pay tax till Budget 2026, but now they will have to. They also have a profit of Rs 10 lakh (long-term capital gain), so they will have to pay tax of Rs 1.25 lakh at the rate of 12.5%.
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