Sovereign Gold Bond
Many Sovereign Gold Bond (SGB) investors, who had purchased these bonds directly from the Reserve Bank of India (RBI) or from the secondary market, are now nearing completion of five years of their investment. It has been proposed to tighten the rules related to tax exemption in Budget 2026, which may impact the decision of those investors who are thinking of redeeming the bonds prematurely.
Investors investing in Series VI issued on 8 September 2020 and Series XII issued on 9 March 2021 as well as investors in older tranches have also completed the mandatory five-year lock-in period. With the lock-in almost over, some investors feel that gold prices may remain stable after the US-India trade deal. In such a situation, they are considering it as the right time to redeem the investment or sell bonds in the secondary market. However, many investors are confused as the changes suggested in the Budget for FY27 will be applicable to all SGB series issued by RBI from April 1, 2026.
SGBs purchased from RBI
For investors who have purchased SGBs directly from RBI, there will not be much difference in redeeming now or after April 1, 2026, as the tax exemption will continue for them, even if they hold the bonds for the full 8 years. At present, there is no tax on premature redemption even after five years. But the new rule says that after April 1, 2026, there will be no tax exemption on premature redemption. Therefore, if you need money quickly, it may be beneficial to redeem before April 1.
Bought from RBI, sold in secondary market
If someone buys SGB from RBI and sells it in the secondary market, it will attract 12.5% long-term capital gains (LTCG) tax, whether the sale happens before or after April 1. Tax exemption is available only when the bond is held till maturity and redeemed from RBI.
bought and sold in the secondary market
If SGBs purchased from the secondary market are sold, they will be subject to capital gains tax. Short-term tax will be charged on holding for up to 12 months and 12.5% LTCG tax on holding for more than 12 months.
Bought from secondary market, redeemed on maturity
Following the changes in Budget 2026, SGBs purchased from the secondary market will also have to be taxed when redeemed on maturity after April 1, 2026, whereas earlier these were mostly tax-free. Simply put, the objective of the budget is to impose tax on those redemptions which have been purchased from the secondary market. Therefore, investors must keep the tax impact in mind while taking decisions.