Earlier, if you bought Sovereign Gold Bonds (in primary issue or from the secondary market) and held them till maturity (which is 8 years), then all the capital gains at maturity were 100% tax-free. But Budget 2026 has changed this rule.
As per the new SGB Taxation Rule Change (2026), effective from 1st April 2026 – the Capital Gains at Maturity will be Tax Free ONLY if you had subscribed to the Gold Bonds at the time of the original issue (i.e. via primary issue by RBI), AND also held the bond throughout 8 years until redemption at maturity.
But if, instead of the above, you had purchased SGB in the secondary market, then even if you hold it until maturity, your capital gains on maturity will no longer be tax-free and instead be taxed. So going forward, those who purchase SGBs in the secondary market must pay capital gains tax even if they then hold it till maturity.
So if you purchased the bonds in the secondary market, then here is how much tax you will pay:
- If sold before maturity but within 12 months – It will be STCG and taxed at slab rates.
- If sold before maturity but after 12 months – It will be LTCG and taxed at 12.5 % (no indexation).
- If held until maturity, then, as per the new SGB taxation rule change in Budget 2026, you will pay 12.5% LTCG tax on long-term gains at maturity.
My guess is that the reason for this change is multi-fold.
One is to ‘only’ allow a tax-free benefit to real long-term investors who hold it from start to end (8 years). Also, this is to cut down on the tax arbitrage that existed, as some investors in recent times had started buying SGBs in the secondary market (with a much lower residual period of less than 8 years for soon-to-mature SGBs) to benefit from tax exemption. Another plausible reason for this new taxation change may be to help the government absorb or mitigate the fiscal impact of exceptionally high gold prices on SGB redemptions. With gold prices surging significantly in recent years, the government faces substantially larger payout obligations at maturity or premature redemption for older tranches, as redemption values are linked to prevailing gold prices. By limiting the full tax-free benefit primarily to original long-term subscribers (encouraging direct participation in new issuances and long-term holding), the move may indirectly discourage speculative secondary trading, stabilise demand dynamics, and reduce the overall attractiveness of SGBs for short-term or secondary buyers amid these elevated redemption costs – thereby easing some pressure on government finances without directly altering the redemption mechanics themselves.