SGBs fall 10% as Budget 2026 tightens tax exemption rules

If an investor purchases an SGB in the secondary market and redeems it at maturity, the capital gains tax exemption may apply

• Sovereign Gold Bonds fell up to 10% after new tax rule in Finance Bill 2026
• Tax exemption on SGBs now applies only to original issue holders till maturity
• Amendment takes effect April 1, 2026, impacting 2026-27 tax year and beyond

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Sovereign Gold Bonds (SGBs) declined sharply on February 2, with several series recording a 10 percent drop, a day after the changes made in the Budget unsettled investors, which also coincided with a crash in global price of the metal.

At around 1 pm, SGBDEC26 was down Rs 1,760, or 10 percent, at Rs 15,840 from. SGBSEP31II also slipped 10 percent to Rs 14,575.77 and SGBJAN27, too, saw a similar drop at Rs 14,296.50, National Stock Exchange (NSE) data showed.

Gold prices on MCX also continued to slump again, trading at Rs 1,46,289 per 10 grams, down 3 percent at around 4 PM IST.

The sell-off came a day after the Budget a new rule on SGBs, which likely spooked investors, triggering additional selling in the secondary market.

At present, investors who buy SGBs and hold them until maturity do not pay capital gains tax on redemption. These bonds are issued by the RBI in several tranches over the years.

The government now wants to clearly define eligibility for this tax benefit to avoid confusion. Under the proposed change, the exemption will apply only to investors who purchase the bond at its original issue price set by the Reserve Bank of India (RBI) and hold it until maturity.

If an investor purchases an SGB in the secondary market and redeems it at maturity, the capital gains tax exemption may not apply. The change takes effect on April 1 and will be applicable for the 2026-27 tax year and subsequent years.

According to the Finance Bill 2026, any capital gains arising by way of redemption of Sovereign Gold Bonds issued by the Reserve Bank of India... shall be exempt from tax if held by an individual until maturity.

SGBs are government-backed bonds that enable investors to invest in gold without owning physical gold. They are issued by the Reserve Bank of India on behalf of the government and their value varies with gold prices. Along with gains for a rise in gold prices, investors receive a fixed annual interest rate of 2.5 percent, paid semi-annually.

The bonds mature in eight years but provide an early exit option after five years. Since they do not involve physical gold, investors avoid worries about storage or security, and these bonds can be traded on stock exchanges.