Budget 2026 has not removed the tax‑free benefit on Sovereign Gold Bonds (SGBs) but has sharply narrowed who can claim it, by restricting the capital gains exemption only to original subscribers who hold till maturity.

What was the SGB tax rule earlier?

• Earlier, individual investors did not pay any capital gains tax if they held a Sovereign Gold Bond till maturity and the bond was redeemed with the RBI.

• In practice, even investors who bought SGBs from the secondary market (stock exchanges) were effectively enjoying tax‑free maturity, as long as they held the bond till redemption.​

What has changed in Budget 2026 for tax‑free benefit on Sovereign Gold Bonds ?

• Budget 2026 states that capital gains tax exemption will be available only if both conditions are met:

  • The SGB was subscribed at the time of original issue by the RBI.
  • The bond is held continuously until redemption on maturity.
• SGBs bought from the stock market will no longer qualify for tax‑free maturity, even if held till the end; gains on redemption for such secondary‑market buyers will now be taxable capital gains.
• The exemption will apply uniformly across all SGB series issued by the RBI, removing earlier ambiguity.

What has not changed?

• For investors who subscribed in the primary issue and hold till maturity, nothing changes: their capital gains remain tax‑free.​

• The 2.5% annual interest on SGBs continues to be taxed as income under “Income from Other Sources”, exactly as before.​
• The change is about who gets the capital gains exemption, not about interest taxation or the basic SGB structure.​

Example: How SGB tax works now

• Suppose gold prices rise and an investor makes a capital gain of ₹10 lakh on an SGB at maturity:​

  • Investor A subscribed in the original issue and held the bond till maturity:
    • Capital gains tax = zero (exemption continues).
  • Investor B bought the same SGB on the stock exchange and held till maturity:
    • Earlier: effectively no capital gains tax at maturity.
    • After Budget 2026: the ₹10 lakh gain will be taxable. If it qualifies as a long‑term capital gain, 12.5% tax applies → tax of ₹1.25 lakh.​
• If Investor B sells before maturity, the gain is still taxable; rate depends on period of holding and the investor’s income slab (this is not a new rate, but normal capital gains rules).​

Strengths of the new SGB tax rule

• Reinforces SGBs as a sovereign‑backed long‑term savings product, not just a tax‑efficient trading avenue.​

• Removes ambiguity around secondary‑market purchases and ensures consistent treatment across all RBI SGB series.​
• Aligns the tax break clearly with policy intent: reward original, long‑term holders who stay invested till maturity.​
• Encourages investors to plan SGBs as part of strategic long‑term asset allocation rather than short‑term arbitrage.​

Risks / downsides for investors

• Secondary‑market buyers lose the tax‑free maturity benefit, reducing the overall attractiveness of buying old SGB tranches on exchanges.​

• Investors who relied on a buy‑cheap‑on‑exchange, hold‑till‑maturity, pay‑zero‑tax strategy will now face capital gains tax on redemption.​
• Investors exiting before maturity (whether primary or secondary buyers) must factor in capital gains or slab‑rate tax, making SGBs less flexible for medium‑term horizons.​
• Some complexity is added: investors must track how and when they bought each SGB to know if maturity gains are exempt.​

FAQs on Budget 2026 SGB tax change

1. Are Sovereign Gold Bonds still tax‑free at maturity?

• Yes, but only if you subscribed in the original issue and held the SGB continuously till maturity; for you, maturity capital gains remain tax‑free.​

2. I bought SGBs from the stock exchange. Will my maturity gains be tax‑free?

• No. After Budget 2026, SGBs bought from the secondary market do not qualify for tax‑free maturity; gains on redemption will be taxed as capital gains.​

3. Has the tax on the 2.5% SGB interest changed?

• No. The 2.5% annual interest is still fully taxable as income, exactly as before the Budget.​

4. What capital gains tax rate will apply to secondary‑market SGB buyers?

• If the gain is long‑term, a 12.5% capital gains tax rate applies (plus surcharge/cess as applicable). Short‑term gains can be taxed at your slab rate.​

5. Will I pay more tax because of this change?

You will pay more tax only if you bought SGBs from the secondary market, or if you plan to exit before maturity; original subscribers holding till maturity are unaffected.​