The Union budget for 2026-27 has removed the tax-free redemption benefit on sovereign gold bonds (SGBs) for secondary market buyers. Starting 1 April 2026, only those investors who bought SGBs at the time of issue and held them till maturity will get tax-free gains, excluding investors who purchased the bonds on stock exchanges even if they hold them till maturity.
The Budget has also quietly withdrawn another important exemption that impacts primary buyers as well. Tax laws currently allow capital gains tax exemption on SGBs redeemed prematurely through the Reserve Bank of India (RBI) after the five-year lock-in ends. This benefit has now been removed.
“Now, tax exemption is not available to anyone upon premature redemption, including if the redemption is by the RBI after a lock-in period of five years,” said Harshal Bhuta, partner, P. R. Bhuta & Co. CAs.
Together, the changes sharply narrow the circumstances under which SGBs retain their marquee tax-free status, effectively confining the benefit to investors who buy at issue and hold for the full eight-year maturity.
The changes will come into effect from 1 April 2026, but a final opportunity remains for a narrow set of investors.
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Final window
According to the RBI’s premature redemption calendar for sovereign gold bonds for October 2025 to March 2026, four SGB series—2020-21 Series VI, 2020-21 Series XII, 2019-20 Series X and 2019-20 Series IV—will be eligible for premature redemption. These will mature on 7 March, 9 March, 11 March and 17 March, respectively.
Harsh Roongta, founder, Fee Only Investment Advisers, an investment advisory firm registered with the Securities and Exchange Board of India, said investors have to give notice to their bank or depository and submit their redemption request at least one month in advance.
“Investors can still use the premature redemptions lined up in March when the notice window opens in February. All such redemptions will be tax-free,” he said.
Only investors holding SGBs from these specific series are eligible to seek tax-free premature redemption with the RBI during the February 2026 windows, provided they meet the minimum holding requirement.
If the RBI notifies redemption as per the schedule, any investor—primary subscriber or secondary market buyer—who holds units of SGB 2020-21 Series VI, 2020-21 Series XII, 2019-20 Series X or 2019-20 Series IV and has completed at least five years from the date of issue will be able to apply.
As per RBI’s circular dated 22 August 2025, the premature redemption windows for these series are expected to open on February 5, February 6, February 7 and February 13, respectively.
“The investor can exit at the RBI-declared redemption price and, since the redemption happens before March 31, 2026, the capital gains remain tax-exempt under the existing law,” said Roongta.
Investors can submit the request for premature redemption to their bank, depositories NSDL and CDSL, or the RBI Retail Direct.
How will SGBs be taxed starting April
SGBs have long stood out among gold investments for their favourable tax treatment. Until now, capital gains on SGBs were exempt when bonds were redeemed with the RBI, either at maturity or through RBI-notified premature redemption windows after five years.
Starting April 2026, exemption at maturity is explicitly limited to primary subscribers. The premature redemption route after five years is shut for both secondary as well as primary buyers. This applies to all SGBs redeemed on or after 1 April 2026.
The FAQ on Budget 2026 has clarified this explicitly, said Bhuta.
“FAQ specifies that the exemption shall apply only where the SGB is held continuously until redemption on maturity. Premature redemption, even after completion of the prescribed lock-in period, shall not be eligible for exemption.”
This means SGBs are tax-free only under one condition—bought at the time of issue and held for eight years till maturity.
In all other situations, taxpayers will need to pay capital gains tax of 12.5% when held for over one year. Budget 2024 had changed the long-term capital gains holding period from 24 months to 12 months and the tax rate to 12.5% from the earlier 10%. Short-term gains on SGBs are taxed at slab rates.
