Held SGBs for over 5 years: Should you redeem or wait until after April 1?

If unit holders bought SGBs from the secondary market, the tax treatment changes slightly

• SGB investors can redeem units before April 1, 2026, for tax exemption.
• Premature redemption after April 1, 2026 will no longer be tax-exempt
• SGB secondary market sales incur capital gains tax, no matter the holding period.

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Several sovereign gold bond (SGB) investors, who bought directly from the Reserve Bank of India (RBI) or through the secondary market, are now close to completing five years of their holding period.

Budget 2026, which proposes to tighten tax exemption norms, may weigh on their decision to redeem the bonds prematurely.

Investors who subscribed to the SERIES VI on September 8, 2020, Series XII on March 9, 2021 along with those who invested in earlier tranches have completed the mandatory five-year holding period.

As the lock-in period is almost over, some investors, in light of the US–India trade deal, expect gold prices to remain stable and believe this may be a good time to redeem their investment or sell the bonds in the secondary market.

Many, however, are unsure as the amendments proposed in the budget for FY27 will apply to all SGB series issued by the RBI from April 1, 2026.

We try to bring clarity on the tax changes to help investors make an informed decision

Purchased from RBI

Primary subscribers should be indifferent to whether they redeems now or after April 1, 2026 because the tax exemption will continue for them even if they hold the units until the end of the eight-year period.

At present, even the five‑year premature redemption periods are also treated as exempt.

The new rule, effective April 1, 2026, says that premature redemption will no longer be eligible for an exemption. If you need money in the near future, you can redeem units before April 1 to avail tax exemption.

"For the point on premature exit, no capital gains tax is payable on profit up to March 31, 2026," said Rajesh H Gandhi, Partner, Deloitte India.

This means that for primary subscribers, both five-year and eight-year redemptions through the RBI are currently tax-free.

Purchased from RBI, sold in the secondary market

If a primary subscriber sells SGBs in the secondary market, the gains will be taxed at 12.5 percent as long-term capital gains (LTCG), irrespective of whether the sale occurs before or after April 1.

The tax exemption applies only if bonds are held until maturity and redeemed by the RBI. The choice between selling in the secondary market or holding until maturity will depend on the estimated capital appreciation of staying invested, compared with the tax payable under LTCG on immediate sale.

"For instance, Mr A had invested in 2021 Original Issue in SGB’s from RBI at Rs 4777 per gram. If the units are sold in the secondary market at the current approximate rate of Rs 15,500 per gram, Mr A will be liable to pay Rs 1,278 in LTCG tax on gains of Rs 10,223 at 12.5 percent," BCAS joint secretary Mrinal Mehta said.

If he holds it until maturity, Mr A will not have to pay any tax and will also benefit from capital appreciation. “Clearly, staying invested seems ideal if you are a primary subscriber," he added.

Bought and sold in the secondary market

If unit holders bought the bonds from the secondary market, the tax treatment changes slightly. Irrespective of how long they hold the bonds, any sale in the secondary market attracts capital gains tax. Gains are taxed as short-term capital gains (STCG) if the holding period is up to 12 months and as LTCG if the holding period exceeds 12 months, with LTCG taxed at 12.5 percent.

Purchased from the secondary market, redeeming at maturity

The Budget 2026 amendment will affect investors who bought SGBs in the secondary market. The maturity proceeds will now be taxed from April 1 on, even though they were previously broadly exempt. Therefore, if you want to redeem them now, you can do so to reduce your tax liability.

"If Mr A has bought SGB from the secondary market in 2021, holds the bonds till maturity, still will be liable to LTCG @ 12.5 percent," Mehta said.

Gandhi said, "The essence of the budget amendment is to bring to tax those redemptions (post 1 April 2026) for which the purchases have been made in the secondary markets."