Is SGB redemption taxable? How gold bond tax rules differ for individuals and HUFs

How are SGBs taxed?

• Individuals get tax exemption on SGB redemption after five years
• HUFs must pay capital gains tax on SGB redemption
• Tax rules for individuals change from April 1, 2026

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Tax treatment of Sovereign Gold Bonds (SGBs) redemption can vary depending on the type of investor and timing of exit. Today's Ask Wallet Wise query explains that while individuals may get tax exemption on redemption under certain conditions, HUFs and other entities may still face capital gains tax.

I am holding Sovereign Gold Bonds (SGBs) under my Hindu Undivided Family (HUF) category as well as in my name. The same have completed five years of holding. I would like to understand whether capital gains arising on redemption after the five-year lock-in period are exempt from taxation. 

Expert's Advice: As per the present scheme of taxation of Sovereign Gold Bonds, the redemption is not treated as a transfer under the provisions of income tax laws for an individual holder.

Since there is no transfer under the laws, the question of any capital gains arising does not arise for such an individual. This benefit is not available to other investors, like HUFs, trusts, etc.  Please note that for availing this exemption on redemption, you need not be an original allottee, nor does your own holding period need to be five years or more.

So, whether you have bought from the secondary market or have been allotted the bonds as subscribed, or whether you have held the same for five years or not, the profits will be tax-free if the same are tendered for redemption after five years from the date of issue of such bonds in respect of bonds held in an individual's name.

The finance bill proposes to change this scheme of taxation. As per the proposal, the benefits of capital gains will be available only to those individuals who are the original allottee, and that too only on redemption after eight years on maturity of these bonds.

However, in case you are holding the bonds which have completed five years from the date of issue and the redemption window opens till 31st March 2026, you can still claim the exemption as the proposed law will come into force from 1st April 2026.

Please note that the taxation rules will change only for individuals and not for other eligible holders of the bonds. The HUF will continue to pay tax on such bonds as capital gains.

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