The Union Budget 2026 has introduced a significant change in the taxation of Sovereign Gold Bonds (SGBs). The capital gains tax exemption at maturity has now been restricted.

Only original subscribers who purchase SGBs at the time of issuance and hold them till maturity will be eligible for tax-free capital gains. Investors who buy SGBs from the secondary market will no longer get this exemption, even if they hold the bonds till maturity.

This change alters the post-tax return profile of SGBs, especially for investors purchasing bonds from stock exchanges.

Capital Gains Tax Rule After Budget 2026

Before Budget 2026, capital gains arising from the redemption of SGBs at maturity were exempt from tax, irrespective of whether the bonds were purchased in the primary market or from the secondary market.

After Budget 2026, the tax treatment has changed. Capital gains at maturity will be tax-free only for original subscribers who buy SGBs directly from the government during the issue period and hold them till the end of the 8-year maturity.

Investors who purchase SGBs from stock exchanges or through private transfers will be required to pay capital gains tax on redemption, even if the bonds are held till maturity.

SGBs are traded on the National Stock Exchange and the Bombay Stock Exchange after issuance. These trades are considered secondary market transactions. Under the new rules announced in Budget 2026, secondary market investors will not qualify for tax-free capital gains at maturity.

If SGBs bought from the secondary market are sold or redeemed, capital gains tax will apply as per the holding period. Short-term capital gains, where the holding period is up to two years, will be taxed as per the investor’s income tax slab.

Long-term capital gains, where the holding period exceeds two years, will be taxed at 12.5 per cent without indexation.

The annual interest on Sovereign Gold Bonds remains unchanged after Budget 2026. SGBs continue to offer a fixed interest rate of 2.5 per cent per annum on the issue price. The interest is paid semi-annually.

This interest income is taxable under the head “Income from Other Sources” and is taxed according to the investor’s applicable income tax slab. No tax is deducted at source on this interest.

The maturity period of Sovereign Gold Bonds remains unchanged at 8 years. Premature redemption continues to be allowed after the completion of five years from the date of issuance. Early redemption can be exercised only on interest payment dates.

The redemption price, whether at maturity or on premature redemption, is calculated based on the simple average closing price of gold of 999 purity for the previous three working days, as published by the India Bullion and Jewellers Association Limited.

As per the latest RBI and PIB updates, no new Sovereign Gold Bond tranches have been announced for FY 2025–25 or 2026. The last SGB tranche issued was the 2023–24 Series IV. The subscription window for this tranche was from 12 to 16 February 2025.

Since no new issuance calendar has been released, investors can access SGBs only through the secondary market.

With the tax exemption now limited to original subscribers, the difference between primary market and secondary market SGB investments has widened. Original subscribers who hold SGBs till maturity continue to enjoy tax-free capital gains along with 2.5 per cent annual interest.

Secondary market investors will need to account for capital gains tax while estimating returns. This applies even if the bonds are held until the 8-year maturity.

• The primary change announced in Budget 2026 relates to the capital gains tax exemption.
• Tax-free capital gains at maturity are now available only to original subscribers holding SGBs till maturity.
• SGBs purchased from stock exchanges no longer qualify for tax-free capital gains.
• Interest taxation, maturity period, redemption pricing, and scheme structure remain unchanged.
• Sovereign Gold Bonds continue to be government-backed instruments linked to gold prices. However, post-Budget 2026, taxation has become a key factor differentiating primary and secondary market investments in SGBs.

Other key features of the Sovereign Gold Bond scheme remain unchanged after Budget 2026. The minimum investment continues to be one gram of gold. The maximum investment limit remains four kilograms for individuals and Hindu Undivided Families, and 20 kilograms for trusts and institutions.

SGBs continue to carry a sovereign guarantee on both principal and interest. They remain eligible to be used as collateral for loans, subject to lender terms. NRIs continue to be ineligible to invest in new SGBs.