Sovereign Gold Bonds (SGBs) of different tenures witnessed a decline of up to 10% on the NSE on Monday, February 2, following government proposal to eliminate the capital gains tax exemption for SGBs bought via secondary markets.
Finance Minister Nirmala Sitharaman in Budget 2026 on February 1, proposed capital gains tax exemption for SGBs only if purchased directly from RBI and held until maturity. This change applies to SGBs bought on or after 1 April 2026.
According to the new regulation, the capital gains exemption at maturity will be granted exclusively to those investors who subscribed to the SGB when it was first issued and maintained their investment until maturity. If you purchase the same SGB on the secondary market, you will be ineligible for the capital gains tax exemption, regardless of how long you hold it until maturity.
Previously, the guidelines were straightforward and easy to understand. When you acquired an SGB and kept it until it matured, the capital gains were entirely exempt from taxes, regardless of whether you obtained the bond directly from the government or later traded it on the stock exchange.
If you purchase an SGB today from the stock market and keep it until its maturity, you will incur capital gains tax. Under previous regulations, that same investment would have been entirely tax-exempt.
For instance, two investors possess the identical SGB and redeem it in on the same maturity date. One acquired it during the initial offer and paid no tax. The other purchased it from the market and faces taxation. Same bond, same maturity, yet different tax implications.
This scenario raises significant concerns regarding fairness, consistency, and the dependability of long-term tax incentives, as noted by experts.
According to reports, Deepak Shenoy, the CEO of Capitalmind, indicated that this shift is a significant downside for purchasers of second-hand SGBs who had relied on tax-exempt returns at maturity.
Shenoy pointed out that these investors will now be subject to taxes on their profits just like any other capital asset, eliminating the primary benefit that positioned SGBs as a better option compared to physical gold or ETFs.
Key reason for capital gains tax setback
According to Crisil Intelligence, The move to provide exemption from capital gains tax for investments in sovereign gold bonds only where such bonds are subscribed at the time of original issue and held continuously until redemption on maturity aims to bring uniformity and clarity to the tax treatment of sovereign gold bonds. It aligns the exemption with the original intent of encouraging long-term participation in the scheme.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
