Budget 2026: Capital Gains Tax Exemption on Sovereign Gold Bonds Only if Held Till Maturity [Read Finance Bill 2026]
Capital gains tax exemption on Sovereign Gold Bonds to apply only to original subscribers holding bonds till maturity
The Union Budget for the Financial Year 2026-27 was presented by Finance Minister Nirmala Sitharaman in the Lok Sabha today (Sunday, 1 February 2026).
In a move that tightens the tax treatment of Sovereign Gold Bonds (SGBs), the Finance Minister has proposed restricting the capital gains tax exemption on these instruments only to individual investors who subscribe to the bonds at the time of original issuance and hold them continuously until redemption on maturity.
According to the proposal in the Finance Bill, 2026, capital gains exemption will not be available for SGBs acquired through secondary market purchases or for bonds transferred before maturity. The exemption will apply only when an individual investor subscribes directly to the Sovereign Gold Bonds at the time of their original issue by the Reserve Bank of India and retains them till maturity.
The amendment also clarifies that this condition will apply uniformly across all issuances of Sovereign Gold Bonds by the RBI, ensuring consistency in tax treatment across different tranches and eliminating interpretational ambiguity.
At present, capital gains arising on redemption of SGBs in the hands of individuals are exempt from tax, a feature that has made the bonds an attractive long-term investment option for gold exposure. In addition, investors earn a fixed annual interest on the investment, further boosting the appeal of the instrument. The proposed change narrows the scope of the exemption by clearly linking it to long-term holding and original subscription.
The proposal may reduce the attractiveness of SGBs in the secondary market but it preserves the tax incentive for long-term investors who participate directly in RBI issuances. Financial planners also expect the change to bring greater clarity and predictability to the tax treatment of gold-linked instruments.
The proposed amendment will take effect from 1 April 2026 and will apply from the tax year 2026-27 onwards.
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