When Finance Minister Nirmala Sitharaman presented the Union Budget 2026, most people were watching for tax slab changes and infrastructure allocations.
But buried in the fine print was a change that’s going to affect lakhs of gold investors across India, a complete overhaul of how Sovereign Gold Bonds get taxed.
So, the Union Budget 2026 dropped a significant change that’s got a lot of SGB investors scratching their heads.
The government tweaked the long-term capital gains tax rules for SGBs, and it’s creating two different groups of investors now: those who’ll keep enjoying tax-free returns and those who won’t.
Sounds confusing? Let me break it down for you in the simplest way possible.
What are Sovereign Gold Bonds (SGBs)?
Consider SGBs as a way to invest in gold without purchasing actual gold. These bonds are issued by the RBI and are based on the price of gold. You get the benefits of gold investment without worrying about storage, purity, or making charges. Plus, you earn a sweet 2.5% annual interest on top of whatever gold prices do. That’s money you’d never make if you just bought gold jewelry or coins.
These bonds have an 8-year maturity period, but you can exit after 5 years if you want. And if you need liquidity before that? You can sell them on the secondary market through NSE or BSE.
SGB Tax Rules Before Budget 2026
If you bought sovereign gold bonds and held them till maturity, you paid absolutely zero long-term capital gains tax. None. That was the deal, whether you bought directly from the RBI during their initial offering or picked them up later from the stock exchanges.
Let’s say gold prices went up and you made ₹10 lakhs profit. Under the old rules, you’d keep the entire ₹10 lakhs. No 12.5% tax eating into your gains. That made SGBs incredibly attractive compared to physical gold or even Gold ETFs.
The 2.5% annual interest you received was taxable as per your income slab. But the capital gains part is completely tax-free at maturity.
This combination made SGBs one of the best gold investment options out there. And that’s exactly why so many smart investors jumped on them.
What Changed in SGB Tax Under Budget 2026
Now comes the twist that Budget 2026 brought in. The government basically said, “Hold on, let’s make a distinction here.” And they created two categories of SGB investors with completely different SGB tax treatments.
Category 1: Primary Market Investors
If you subscribed to SGBs directly when the RBI issued them, you know, during those initial offering periods, you’re golden. Nothing changes for you. Your long-term capital gains remain tax-free at maturity.
Category 2: Secondary Market Buyers
But if you bought SGBs from the secondary market (NSE/BSE), even if you hold them till maturity, you’ll now have to pay long-term capital gains tax. The tax exemption is gone for you.
This is massive because earlier, it didn’t matter where you bought your SGBs from. Primary or secondary market receives the same tax treatment, but not anymore.
SGB Tax Rules After Budget 2026
Let me use some numbers to help you visualize.
Scenario 1: Eight years later, you purchased SGBs for ₹5 lakhs from RBI’s initial offering. The price of gold doubled. The current value of your investment is ₹10 lakhs. ₹5 lakhs is your profit.
Tax on capital gains: ₹0
That ₹5 lakh profit is completely yours to keep. The government won’t touch it.
Scenario 2: You bought ₹5 lakhs worth of SGBs from NSE. Same situation. Eight years later, same ₹5 lakh profit.
Capital gains tax: ₹62,500 (12.5% of ₹5 lakhs).
Thus, you receive ₹4.37 lakhs after taxes instead of the entire ₹5 lakhs.
Can you see the difference? Simply because of where you purchased your bonds, you will have ₹62,500 less in your pocket.
And remember that 2.5% annual interest? That’s taxable for everyone now as per your income tax slab. No changes are there; it was always taxable, and it continues to be.
How SGB Tax Is Calculated Now
Let’s get into the actual math because understanding this will help you plan better. Say you invested ₹2 lakhs in SGBs from the secondary market back in 2019. Now it’s 2027, and you’re redeeming at maturity. The current value: ₹4 lakhs.
Your capital gain: ₹4 lakhs – ₹2 lakhs = ₹2 lakhs
Long-term capital gains tax at 12.5%: ₹25,000
Amount you receive after tax: ₹3.75 lakhs
Plus, every year you were getting that 2.5% interest. On ₹2 lakhs, that’s ₹5,000 annually. This gets added to your income and taxed according to your slab. If you’re in the 30% bracket, you’d pay ₹1,500 tax on this interest every year.
Over 8 years, that’s ₹40,000 in interest income, but you’d have paid about ₹12,000 in taxes (at 30% slab) during this period.
Total SGB tax outgo: ₹25,000 (capital gains) + ₹12,000 (interest) = ₹37,000
For someone who bought from RBI initially? They’d only pay that ₹12,000 on interest. The ₹25,000 capital gains tax is saved.
Impact of Budget 2026 on SGB Investors
This change is going to shake things up in a few ways.
Secondary Market Prices Might Drop
Think about it. Why would someone pay full price for an SGB on the exchange when they’ll have to pay capital gains tax later? The tax disadvantage might start reflecting in lower secondary market prices. We could see SGBs trading at a discount compared to their actual gold value.
Early Redemption Might Increase
Many investors who bought from the secondary market might now consider selling before maturity. If they’re going to pay tax anyway, why not exit early when it makes sense? This could increase supply in the secondary market.
Future Primary Issues Will Be More Attractive
Whenever the RBI opens new SGB subscriptions (if they do), expect a mad rush. The tax-free benefit is huge, and everyone will want to grab it at source rather than buying from exchanges later.
Existing Investors Need to Recalculate
If you’re holding SGBs bought from NSE or BSE, sit down with a calculator. Figure out your expected gains, calculate the tax, and then decide if holding till maturity still makes sense for you. Sometimes, selling earlier in a lower tax bracket might actually work better.
Things to Keep in Mind
Here’s what you absolutely need to remember going forward:
Know Your Purchase Source: Check your records. Did you buy from RBI’s subscription or from the market? This determines everything. If you’ve bought multiple times, you might have both types, each with different tax treatments.
Compare With Other Gold Options: Is SGB still better than Gold ETFs after this change? For secondary market buyers, maybe not by much. Gold ETFs attract the same 12.5% long-term capital gains tax. The only extra benefit SGB gives you now is that 2.5% interest.
Time Your Exit Smartly: Don’t just hold blindly till maturity because that’s what everyone says. If gold prices spike and you’ve made good profits, calculate your tax liability. Sometimes booking profits early makes more sense than waiting.
Document Everything: Keep proper records of your purchase price, date, source (primary/secondary), and mode of purchase. When tax time comes, you’ll need all this to correctly calculate your liability and claim the right exemptions.
Consider Your Tax Slab: If you’re in a lower income year, that might be a good time to redeem and pay capital gains tax. Tax planning matters more now than ever with the SGB tax rules 2026.
Conclusion
That concludes the overview of the new SGB tax structure in Budget 2026. According to the government’s reasoning, the tax exemption was intended to encourage long-term gold investment rather than guarantee tax-free returns. The primary market exemption still encourages direct participation in government securities, which was the original goal.
For you as an investor, the key takeaway is that SGBs are still a decent investment option, but they’re not the clear winner they used to be. If you bought from RBI initially, you’re sitting pretty. If you bought from the market, you need to run the numbers and see if it still works for your portfolio.
The good news is you know this now, rather than finding out at maturity. That gives you time to plan, calculate, and make informed decisions about whether to hold or sell.
What matters most is that you adjust your strategy based on these new rules.
Don’t just follow old advice that’s now outdated. Every investment needs a fresh look when the rules change, and SGB tax is a perfect example of that.
Read: 5 Laws Of GOLD
Frequently Asked Questions (FAQs)
1. How is interest earned on SGBs taxed?
The 2.5% annual interest you earn on Sovereign Gold Bonds is added to your total income and the SGB taxed according to your income tax slab. So if you’re in the 30% bracket, you pay 30% tax on that interest income. This applies to everyone, regardless of whether you bought from the primary or secondary market. The only thing that changed with Budget 2026 is the capital gains tax treatment, not the interest taxation.
2. Are SGBs better than Gold ETFs after the new tax rules?
For primary market buyers, SGBs still have a clear edge because you get tax-free capital gains plus 2.5% interest. But for secondary market buyers, the advantage has narrowed significantly. Gold ETFs also attract 12.5% long-term capital gains tax, just like SGBs bought from the market now. The only extra benefit of SGBs is the interest income. Whether that’s enough to make up for the liquidity and convenience of ETFs depends on your specific situation and investment goals.
3. How does SGB taxation compare with physical gold after Budget 2026?
Physical gold attracts 12.5% long-term capital gains tax after 24 months of holding. For SGB secondary market buyers, it’s the same rate now. However, SGBs still score points because you earn that 2.5% annual interest (even though it’s taxable), and you don’t have making charges, storage issues, or purity concerns like with physical gold. Primary market SGB buyers obviously have the best deal with zero capital gains tax.
