SGB Capital Gains Tax Exemption Narrowed From FY 2026-27 — What Changes for Existing Holders

By Nitish Bharadwaj · Published Jul 14, 2026 · 6 min

Since SGBs launched in 2015, redemption gains were tax-exempt for any individual holder — whether bought at RBI's original issue or picked up later on NSE/BSE — under Section 47(viii). Budget 2026 narrows this from FY 2026-27 (redemptions after April 1, 2026): only original subscribers who hold continuously to the full 8-year maturity stay tax-free. Secondary-market buyers now owe capital gains tax even at maturity. This guide covers who's affected, what's unchanged, and the narrow window some existing holders have to exit under the old rules first.

Sovereign Gold Bonds have carried a reputation as the one gold investment with a genuinely tax-free exit — and since the scheme launched in 2015-16, that was true for any individual holder, whether you subscribed at RBI's original issue or bought the bond later on NSE or BSE. Budget 2026 changes that. From FY 2026-27, only original subscribers who hold their SGB continuously to the full 8-year maturity keep the exemption. If you bought on the secondary market, the tax-free exit is gone — even if you hold to maturity.

What Changes, and From When

Under the Income-tax Act, 1961's Section 47(viic) — now Section 70(1)(x) of the Income-tax Act, 2025 — capital gains on SGB redemption were treated as not a 'transfer' at all for tax purposes, which is what made the exemption apply so broadly. The Finance Bill 2026 narrows this specifically to individuals who subscribed at the original RBI issuance and hold without a break to the 8-year maturity date. Anyone who acquired their SGB holding on the secondary market now owes capital gains tax on redemption, regardless of how long they've held it.

Who's Still Fully Covered

If you subscribed to an SGB tranche at its original RBI issuance — through a bank, post office, or the RBI Retail Direct portal — and you hold it without selling or transferring ownership all the way to its 8-year maturity date, nothing changes for you. Your redemption proceeds, including the price appreciation over the original issue price, remain completely exempt from capital gains tax. The only additional layer for original subscribers is the open question around premature exits, covered below.

Who Now Owes Tax, and How Much

If you bought your SGB holding on the secondary market — NSE or BSE — at any point, your redemption gain is now taxed the same way as a gold ETF or physical gold: 12.5% Long-Term Capital Gains tax without indexation if held over 12 months, or your income slab rate as Short-Term Capital Gains if held 12 months or less. This is the same post-Budget 2024 capital gains framework already applied elsewhere on the site, and the same treatment SGBs already carried for anyone exiting before maturity. What's new is that reaching maturity no longer rescues a secondary-market buyer from this tax.

The 2.5% Annual Interest Is Untouched

None of this affects SGB's interest component. The 2.5% per annum paid semi-annually on your subscription amount continues to be taxed as "income from other sources" at your income slab rate, exactly as before — for both original subscribers and secondary-market holders, before and after this change. Only the capital-gains treatment of the redemption proceeds is affected.

Why This Matters Even Though No New SGBs Are Being Issued

No new SGB tranche has been issued since February 2024, and there's no fresh issuance calendar for FY 2025-26 or FY 2026-27 — a gap already covered in our Gold ETF vs SGB vs Physical Gold comparison. That makes this purely an exit-tax question for the roughly 67 tranches already outstanding, not a factor in any fresh SGB decision. If you hold an SGB bought on the secondary market — a common way to get SGB exposure while primary issuance has been paused — this directly affects what you'll owe when it matures.

If you're weighing SGB against other capital-gains-taxed instruments for the year ahead, our mutual fund capital gains guide lines up the same 12.5%/slab-rate framework across equity, debt, and hybrid funds for direct comparison. And if you're planning to redeem a secondary-market SGB holding and reinvest the proceeds into a house, Section 54F — not Section 54 — is the exemption that applies, since SGBs aren't residential property.