The Finances 2026 introduced an enormous setback for the Sovereign Gold Bond (SGB) traders.
Earlier than Finances 2026, all redemptions of SGBs with RBI (untimely redemption or maturity) weren’t thought-about switch and therefore the good points weren’t taxable.
Now, that has modified. The Finances 2026 proposes to restrict this tax exemption just for these bonds purchased on the time of major issuance and held constantly for 8 years till maturity.
On this put up, allow us to see how this transformation impacts you and if there may be something you are able to do to save lots of on capital good points taxes from these bonds.
How Taxation has modified for Sovereign Gold Bonds?
Earlier than Finances 2026, any good points from the “redemption” of Sovereign gold bonds had been exempt from tax. You’ll be able to redeem bonds with RBI in 2 methods.
- On the time of bond maturity (8 years). OR
- Throughout pre-mature redemption home windows. Pre-mature redemption window was obtainable to traders from the tip of the 5th 12 months (because the bond issuance) at six-month intervals. On the time of coupon (curiosity) cost.
This was regardless of how you bought the bond. On the time of major issuance (when the RBI first issued the gold bond). Or within the secondary market.
Now, the rule has been modified.
Going ahead, the capital good points can be exempt from tax provided that:
- You acquire the gold bond on the time of major issuance. AND
- Held the bond for 8 years (till maturity). Redeeming with the RBI throughout untimely withdrawal window is not going to assist.
Each the circumstances should be met for good points to be exempt from tax.
Capital good points can be taxable if
- You acquire the gold bonds within the secondary market. That is regardless of whether or not you promote within the secondary market, redeem throughout untimely withdrawal window or maintain till maturity.
- You bought the gold bonds within the secondary market, regardless of whether or not you acquire throughout major issuance or from the secondary market. This was all the time taxable.
- You acquire throughout major issuance and redeemed throughout untimely withdrawal window.
Main issuance means “straight from RBI”. You acquire when RBI initially issued the bond. You utilized as you do for an IPO.
Secondary market means “shopping for on exchanges by your dealer”. You have to have positioned a purchase bid identical to you do if you purchase shares.
Can I do one thing earlier than April 1, 2026, to keep away from paying taxes?
#1 For those who purchased SGBs throughout major issuance, you would not have to fret. You’ll be able to keep away from paying taxes by merely holding the bonds till maturity.
#2 Promoting your SGBs on the secondary market earlier than April 1, 2026, received’t assist save taxes. As a result of gross sales within the secondary markets are taxable even now. At your marginal tax fee for holding interval < 1 12 months. At 12.5% for holding interval > 1 12 months.
Sure, in case your SGB is buying and selling at a pointy premium, you possibly can profit from worth deviation by promoting within the secondary market. However you’ll not get any tax profit and capital good points can be taxed.
#3 Shopping for SGBs within the secondary market received’t assist both. Why? As a result of if you happen to purchase SGB within the secondary market, you don’t have any method out. Your good points on maturity, redemption throughout untimely withdrawal window, or secondary market gross sales can be taxed as capital good points.
#4 The one SGBs (that had been purchased within the secondary market) which can be nonetheless exempt from capital good points are these:
- Are maturing earlier than April 1, 2026, OR
- Which have untimely withdrawal window obtainable earlier than April 1, 2026, and also you redeem these bonds with RBI throughout this window earlier than April 1, 2026
*The Part 47 of the Earnings Tax Act, 1961 and Part 70 of the Earnings Tax Act, 2025 make no distinction between untimely redemption and redemption on maturity. OR how the gold bonds had been bought (major issuance or secondary market). Therefore, any redemption with RBI needs to be exempt from taxes. The modification to Part 70 (introduced in Finances 2026) removes the tax-exemption for untimely withdrawals or for secondary market purchases. Nevertheless, this amended clause comes into impact from April 1, 2026. Subsequently, any untimely withdrawal made earlier than April 1, 2026, needs to be exempt from taxes too, even if you happen to purchased within the secondary market.
| Part 70 (Transactions not thought to be Switch) Clause 1 (x) | |
| Earlier than Finances 2026 | Amended to |
| of Sovereign Gold Bond issued by the Reserve Financial institution of India underneath the Sovereign Gold Bond Scheme, 2015, by means of redemption, by a person | by means of redemption, of Sovereign Gold Bond issued by the Reserve Financial institution of India underneath the Sovereign Gold Bond Scheme, 2015 or any subsequent Sovereign Gold Bond Scheme, if held by a person from the date of authentic problem until maturity |
Nevertheless, there may be spanner within the works. Within the FAQs on Finances 2026 issued by the Earnings Tax division, I discovered the next on Web page no. 54 of this FAQ doc.
//////////////////////////////////////////////////////////////
Q.4 Will the exemption underneath part 70(1)(x) of the Earnings-tax Act, 2025 apply to Sovereign Gold Bonds acquired by secondary market transactions?
Ans: No, the exemption shall not apply to Sovereign Gold Bonds acquired by switch or buy within the secondary market. The exemption is restricted to bonds subscribed to by a person on the time of authentic problem. This was additionally clarified by the Division of Financial Affairs in its OM dated 06.12.2022.
Q.5 Will this exemption be obtainable in instances of untimely redemption of Sovereign Gold Bonds?
Ans: No, the exemption shall apply solely the place the Sovereign Gold Bond is held constantly till redemption on maturity. Untimely redemption, even after completion of the prescribed lock-in interval, shall not be eligible for exemption.
//////////////////////////////////////////////////////////////
With this response, it appears that evidently the Earnings Tax Division gave this clarification (that secondary market purchases aren’t exempt from tax) over 3 years in the past. I couldn’t discover the aforementioned memo on-line. In any case, my understanding is that an inside memo of the Division of Financial Affairs can’t override an act handed by the Parliament of India.
Notice: It is a advanced tax problem. I’m not a tax skilled. Please seek the advice of your tax advisor earlier than performing.
Which SGBs have untimely redemption home windows earlier than April 1, 2026?
For those who go by my evaluation that untimely redemption (for secondary market purchases) remains to be exempt earlier than April 1, 2026, the following query is that are these SGBs which have untimely redemption window earlier than April 1, 2026.
For such SGBs, you possibly can train the choice of untimely redemption and keep away from paying taxes (even if you happen to purchased within the secondary market).
Solely 4 SGBs have such home windows obtainable. Data supply: NSDL
| SGB problem | ISIN | Bond Maturity | Coupon Fee Date |
Dates of submitting untimely redemption request |
| SGB 2020-21 SERIES VI | IN0020200195 | September 2028 | March 7 | Feb 5, 2026, to Feb 25, 2026 |
| SGB 2020-21 SERIES XII | IN0020200427 | March 2029 | March 9 | Feb 6, 2026, to Feb 27, 2026 |
| SGB 2019-20 SERIES X | IN0020190552 | March 2028 | March 11 | Feb 7, 2026, to March 2, 2026 |
| SGB 2019-20 Collection IV | IN0020190115 | September 2027 | March 17 | Feb 13, 2026, to March 7, 2026 |
Therefore, if in case you have purchased any of the above 4 bonds from the secondary market, this may very well be your probability to keep away from paying taxes on good points from these bonds.
In case you are , attain out to your dealer to know the method of untimely redemption. Examine this hyperlink on Zerodha web site. Your dealer ought to have an identical course of.
You should use capital losses to set off capital good points
If in case you have capital losses from sale of any asset, then you should use such capital loss to set off capital good points from sale/redemption of Sovereign gold bonds.
Disclaimer: I’m NOT a tax skilled. Please seek the advice of a Chartered Accountant or your tax advisor earlier than performing on the contents of this put up.
Disclaimer: Registration granted by SEBI, membership of BASL, and certification from NISM on no account assure efficiency of the middleman or present any assurance of returns to traders. Funding in securities market is topic to market dangers. Learn all of the associated paperwork rigorously earlier than investing.
This put up is for schooling functions alone and is NOT funding recommendation. This isn’t a suggestion to take a position or NOT spend money on any product. The securities, devices, or indices quoted are for illustration solely and aren’t recommendatory. My views could also be biased, and I could select to not deal with elements that you simply take into account vital. Your monetary targets could also be totally different. You could have a special threat profile. You might be in a special life stage than I’m in. Therefore, you should NOT base your funding selections based mostly on my writing. There isn’t any one-size-fits-all resolution in investments. What could also be a very good funding for sure traders might NOT be good for others. And vice versa. Subsequently, learn and perceive the product phrases and circumstances and take into account your threat profile, necessities, and suitability earlier than investing in any funding product or following an funding method.