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New Capital Gains Tax Rules Dim SGB Sheen

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 Tightened tax rules for sovereign gold bonds (SGBs) will arrow the scope of who canclaim capital gains exemption. The budget decisionsignals discomfort with SGBs eing used as a tax arbitrageinstrument rather than as along-term savings product.The Finance Bill 2026, presented on February 1, proposed amending the Incometax Act to clarify that theexemption will be availableonly to investors who subscribed to SGBs at thetime oforiginal issuance and holdthem continuously untilredemption on maturity(usually eight years). Premature redemption, even afterthe completion of the prescribed lock-in period, shallnot be eligible for exemption.The change, effective April 1,applies from tax year 2026-27and removes ambiguityaround secondary markettransactions.So far, gains from SGB saleswere exempt if they were held

till maturity, irrespective ofhow long the bond was held orwhether it was bought in theprimary issue or from thesecondary market. “Only theprimary investor who continues to hold until redemptionon maturity will be eligible.Selling before maturity in thesecondary market will attractcapital gains tax,” said AmitSinghania, partner, AreeteLaw Offices.Any sale in the secondarymarket will attract a 12.5% long-term capital gains tax fora holding period of more thanone year. Short-term capitalgains tax would apply at 20%.The annual 2.5% interest onSGBs remains taxable as incomefrom other sources atthe investor’s slab rate.

According to Kalpesh Ashar,founder, Full Circle FinancialPlanners and Advisors, “Investors have around two

months to execute transactions before the new taxation provisions are implemented. However, that will

depend on RBI opening thewindow for redemption."“Demand in the secondarymarket could soften,” pointedout Thomas Stephen, directorand head, preferred, AnandRathi Share and Stock Brokers. With buyers losing thetax advantage, demand coulddry up, leading to more sellersthan buyers. “That will triggeradrop in the premium,” saidAmol Joshi, founder, PlanRupee Investment Services.

 

-The Exconomic Times 02nd Februray,2026

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