SGB tax rules
Gold is up roughly 70% since early 2024, and the government has not sold a single new Sovereign Gold Bond since February 2024.
The interest: always taxable
This part did not change. SGBs pay 2.5% a year on the issue price, in two half-yearly credits. That interest is income from other sources, taxed at your slab rate.
The tax-free exit now has a gate
Until March 2026, the rule was simple and generous: hold an SGB to redemption and the entire capital gain was exempt for individuals, whoever you were.
Selling before maturity
This was always taxable and stays taxable, for everyone. Sell on the exchange after holding more than 12 months and the gain is LTCG at 12.5% without indexation, the post-Budget-2024 treatment for listed securities.
The honest comparison now
Physical gold: no income, LTCG at 12.5% after 24 months, plus making charges and storage headaches. Gold ETF : no income, LTCG at 12.5% after 12 months, expense ratio around half a percent a year.
What this means in practice
If you subscribed at issue, do nothing.
Gold is up roughly 70% since early 2024, and the government has not sold a single new Sovereign Gold Bond since February 2024. The finance ministry said it plainly in 2025: borrowing against a metal that keeps rising costs too much. There is no issuance calendar for FY 2026-27, and there likely will not be one.
But SGBs are still around. The last SGB tranche matures only in February 2032. Around 67 tranches are still out there, paying 2.5% interest and trading on NSE and BSE every day. And from 1 April 2026, Budget 2026 quietly rewrote who gets the famous tax-free exit. If you hold SGBs, or you are buying them in the secondary market because no new ones exist, the rules that apply to you are not the rules everyone quotes.
The interest: always taxable
This part did not change. SGBs pay 2.5% a year on the issue price, in two half-yearly credits. That interest is income from other sources, taxed at your slab rate. RBI deducts no TDS, so it is on you to declare it in your ITR. Nobody escapes this one, original subscriber or secondary buyer.
Even after slab-rate tax, this is positive carry that no other gold vehicle pays. Physical gold and gold ETFs pay you nothing while you hold them.
The tax-free exit now has a gate
Until March 2026, the rule was simple and generous: hold an SGB to redemption and the entire capital gain was exempt for individuals, whoever you were. If gold doubled over eight years, every rupee of that gain was yours, no LTCG, no cess. It made SGB the most tax-efficient way to hold gold in India, by a distance.
Budget 2026 narrowed it. From 1 April 2026, the exemption at redemption belongs only to the original subscriber, the person who bought the bond in the primary issue and held it continuously. The Finance Bill 2026 is explicit on this.
If you bought your SGB on the exchange, that exemption is not yours anymore. When your bond matures, or when RBI redeems it early in the fifth-to-eighth-year window, your gain is taxed like any listed security: held over 12 months, long-term capital gains at 12.5% without indexation; held under 12 months, short-term gains at your slab rate.
The beginner mistake now is buying a 2023 tranche on NSE and assuming the “SGBs are tax-free” line from every old article still covers you. It covers the person who subscribed at issue. It does not cover you.
Selling before maturity
This was always taxable and stays taxable, for everyone. Sell on the exchange after holding more than 12 months and the gain is LTCG at 12.5% without indexation, the post-Budget-2024 treatment for listed securities. Sell within 12 months and it is STCG at your slab rate. One quirk: since your exit price on the exchange reflects gold’s market price, and secondary SGBs often trade at a small discount to the IBJA reference price, a secondary buyer today starts with a slight head start, but pays tax on the whole gain.
The honest comparison now
Physical gold: no income, LTCG at 12.5% after 24 months, plus making charges and storage headaches. Gold ETF: no income, LTCG at 12.5% after 12 months, expense ratio around half a percent a year. SGB held to redemption by an original subscriber: 2.5% taxable interest plus a fully tax-free exit, still the best structure ever offered for gold in India. SGB bought on the exchange today: 2.5% taxable interest, gains taxed at 12.5%, no expense ratio, sovereign guarantee.
Even without the exemption, a secondary-market SGB holds up well against a gold ETF. You get paid 2.5% a year to wait, and there is no fund fee quietly eating your return. What you give up is the tax-free ending, and liquidity: some tranches barely trade, so check volumes before placing a large order.
What this means in practice
If you subscribed at issue, do nothing. Your deal is intact: interest every six months, tax-free redemption at maturity, and RBI’s premature redemption windows continue on schedule (the October 2026 to March 2027 calendar is already out).
If you are buying secondary, run the numbers as a taxable product, not a tax-free one. Compare the post-tax yield against a gold ETF at your slab rate, and check the tranche’s trading volume and its remaining years to maturity. A 2019 tranche redeeming in 2027 is a very different product from a 2024 tranche running to 2032.
The scheme is dead for new money, and the tax break is shrinking to the people who were there at the start. The bonds themselves are still the best gold instrument the government ever made, which is probably why it stopped selling them.