Direct answer
From 1 April 2026 (Tax Year 2026-27), capital gains on redeeming a Sovereign Gold Bond are tax-free only if you, as an individual, held it from the original issue date until maturity. Premature redemption through RBI (allowed after five years) and bonds you bought on the stock exchange are now taxable. Long-term gains (held over 12 months) are generally taxed at 12.5% plus cess. The 2.5% yearly interest was always taxable at your slab and still is.
Many of my clients bought SGBs because “the gain is tax-free”. For most of them that's still true, but only if they hold to maturity. The Finance Act, 2026 changed the clause behind that belief, and it caught two groups off guard: people planning to use RBI's premature-redemption window, and people who bought older tranches cheaply on NSE.
What changed in the law
Section 43 of the Finance Act, 2026 substituted clause (x) of section 70(1) of the Income-tax Act, 2025. Redemption of an SGB is now excluded from capital gains only “if held by an individual from the date of original issue till maturity”. Before this, the exemption was read as covering any individual redeeming through RBI, including on premature redemption.
| Your case | Gain on redemption / sale | Interest (2.5% a year) |
|---|---|---|
| Bought at original issue, held to maturity (8 years) | Exempt | Taxable at slab |
| Bought at original issue, premature redemption via RBI (after 5 years) | Taxable capital gain | Taxable at slab |
| Bought on NSE/BSE, held to maturity | Taxable capital gain | Taxable at slab |
| Sold on the exchange before maturity | Taxable capital gain (as before) | Taxable at slab |
Sources: Finance Act, 2026 (Gazette), section 43; Income-tax Act, 2025 as amended; RBI FAQ on Sovereign Gold Bonds.
Illustration: premature redemption vs holding to maturity
Illustration with assumed prices (not an actual tranche): you subscribed to 20 grams at ₹3,000/gram, and the redemption price works out to ₹12,000/gram.
| Premature redemption (year 6) | Held to maturity (year 8) | |
|---|---|---|
| Capital gain | ₹1,80,000 | ₹1,80,000 |
| Tax on gain (12.5% + 4% cess) | ₹23,400 | Nil |
| Yearly interest (taxable at slab) | ₹1,500 | ₹1,500 |
In this illustration, waiting two more years saves about ₹23,400 in tax. Whether waiting suits you depends on the gold price risk you're willing to carry and your need for cash. The tax is only one input.
How the redemption price and windows work
- The redemption price is the simple average of the closing price of 999-purity gold published by IBJA for the three business days before the redemption date (RBI FAQ).
- Premature redemption is allowed only on interest dates after five years. RBI publishes a calendar with the window to submit requests; see the April–September 2026 calendar.
- No TDS is deducted on SGB interest or redemption, so report both in your return yourself.
For the new section numbers referred to here, see the Income-tax Act 2025 section mapping. For how much gold belongs in a portfolio at all, read the asset allocation guide.