By ring-fencing tax benefits, the government emphasizes long-term investment in sovereign instruments and ensures uniform treatment across all SGB issuances, promoting stable investment behavior and discouraging short-term speculative trading.
| Photo Credit:
lakshmiprasad S
The Budget has clarified that the capital gains tax exemption on sovereign gold bonds will not apply to investors who purchase them in the secondary market and hold them to maturity.
With the sharp rise in gold prices, the change in tax benefits for SGBs will be a major money-spinner for the Government.
Original Investors Benefit
The shift means only original subscribers who hold their SGBs to maturity will get the full tax exemption, while all second-hand buyers will lose it from April 1.
The announcement triggered a sharp 6-10 per cent decline in SGBs across maturities traded on stock exchanges.
Expert Views
Chirag Mehta, CIO, Quantum AMC, said the tax implications will reduce the attractiveness of SGBs, and that people have a better option for investing in exchange-traded funds.
The liquidity of SGB traded on the exchange will also decline sharply, he added.
The sharp run-up in gold prices will not be of much help to SGB investors, as they have to cough up more capital gains tax for every rise in gold prices, he added.
Tax-Efficient Past
For long, SGBs were the most tax-efficient investment products, as investors received 2.5 per cent interest each year and enjoyed complete exemption from capital gains at maturity, regardless of whether they bought the bond from the RBI at issue or picked it up later on the stock exchange.
The government now intends to ring-fence the tax benefit around original issuance. The aim is to remove arbitrage created by investors who bought older SGB series at discounts and still claimed tax-free redemption.
Legal Insight
Rajesh Sivaswamy, Senior Partner, King Stubb & Kasiva, Advocates and Attorneys, said the government move removes any ambiguity regarding secondary market purchases and aligns the tax treatment strictly with the intent of encouraging long-term investment in SGBs.
Holding to Maturity
The measure underscores the importance of holding SGBs to maturity to avail the capital gains exemption and highlights the government’s emphasis on promoting stable, long-term investment in sovereign instruments, he added.
Rajarshi Dasgupta, Executive Director – Tax, AQUILAW, said the capital gains exemption will now be available only to individuals who subscribe to the bonds at the time of the original issue and hold them to maturity.
The Budget also specified that this exemption will apply uniformly across all issuances of SGBs by RBI, ensuring a consistent and standardised tax benefit for eligible investors, he added.
Published on February 1, 2026
