The Union Budget 2026 has brought a significant change in the tax structure of Sovereign Gold Bonds or SGBs. Although many investors are worried that there will be no more tax exemption on gains on SGBs. However, this is not entirely true. The tax exemption benefit is still there, but it will now be available only in certain circumstances.
Earlier, individual investors did not have to pay any Capital Gains Tax if they held Sovereign Gold Bonds till maturity. This is the tax applicable on the gains. In fact, this benefit was also enjoyed by those investors who did not buy Gold Bonds issued by the Reserve Bank but bought them from the stock market. As long as the bond was held till maturity, the capital gains were considered tax-free.
What has been announced in the Budget?
The Union Budget 2026 has now clearly limited this tax benefit. In the case of sovereign gold bonds, exemption from capital gains tax will be available only if a person subscribes to these bonds at the time of issue and holds them continuously till redemption on maturity. It has also been proposed that this exemption will be equally applicable to all sovereign gold bonds issued by the Reserve Bank alone.
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Why this sudden decline?
After this change, capital gains tax exemption will be available only if two conditions are met. First, the investor must subscribe to the SGB at the time of original issue by the RBI. Second, the investor must hold the bond continuously from the date of issue till maturity. This means that SGBs purchased from the secondary market like the stock market will no longer be eligible for tax exemption even if they are held till maturity.
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What hasn’t changed
Nothing has changed for investors who subscribed to the SGB at the time of issue and hold them till maturity. Their capital gains will remain tax-free. The 2.5% annual interest earned on SGBs will remain taxable as income as before.
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A simple example to understand the taxation of SGBs
Let us assume that the price of gold has increased and an investor has made a capital gain of Rs 10 lakh from an SGB. Investor ‘A’ bought the SGB at the time of its initial issue and held it till maturity. This investor will not pay any capital gains tax as before.
Investor ‘B’ buys the same SGB from the stock market a few years later and holds it till maturity. Earlier this investor also did not have to pay any capital gains tax. After Budget 2026, this gain of Rs 10 lakh will be taxed. If it is treated as long-term capital gains, then tax will be applicable at the rate of 12.5%, which means a tax of Rs 1.25 lakh.
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If the investor sells the ‘B’ SGB earlier and falls under a higher income tax slab, the tax amount may be higher. This depends on the income level of the individual and is not due to any new tax rates announced in the budget.