Budget 2026 Tightens Tax-Free Benefit on Sovereign Gold Bonds
The Union Budget 2026 has clarified and narrowed the capital gains tax exemption on Sovereign Gold Bonds (SGBs). The tax-free benefit has not been removed entirely, but it will now apply only under specific conditions.
Who Gets Tax-Free Capital Gains
The tax exemption will continue to apply for:
- Individuals who subscribe to SGBs at the time of original issue by the Reserve Bank of India (RBI)
- Bonds that are held continuously until maturity
For these investors, capital gains on maturity remain fully exempt. However, the 2.5% annual interest income on SGBs will continue to be taxed as per existing income tax rules.
Who Loses the Tax Exemption
The exemption will not apply to:
- Investors purchasing SGBs from the secondary market (stock exchanges)
- Even if such bonds are held till maturity, the capital gains will now be taxable
Example Scenario
Gain on SGB: ₹10 lakh
Original subscriber holding till maturity → ₹0 tax
Secondary market buyer holding till maturity → 12.5% LTCG = ₹1.25 lakh tax (if long-term)
Reason Behind the Change
According to policy intent, this change aims to encourage long-term original investment in SGBs and prevent their use as a tax-efficient trading instrument in secondary markets.
Bottom Line
The Budget 2026 has narrowed, not removed, the tax-free benefit on SGBs. Sovereign Gold Bonds remain tax-efficient only for original subscribers who hold them until maturity. Other investors must now factor capital gains tax into their return calculations.
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