'Holy moly!': Bengaluru CEO after Sitharaman changes income tax rule on Sovereign Gold Bonds

Reacting to Capitalmind CEO Deepak Shenoy's post on X, several users predicted that the change could upend market pricing of SGBs.

Capitalmind's Deepak Shenoy on Sunday sharply criticised the government’s move to amend income tax rules governing Sovereign Gold Bonds (SGBs), warning that the change would hurt long-term investors who bought the bonds in the secondary market. The Bengaluru-based CEO took to X to share his shock regarding the rule change -- a sentiment echoed by several traders and investors.

Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2026, proposed an amendment to Section 70(1)(x) of the Income Tax Act to restrict capital gains tax exemption on SGBs only to investors who subscribed at the original issue and held the bonds continuously till redemption. The revised provision, to take effect from April 1, 2026, will apply from the 2026–27 tax year onwards.

Reacting to the announcement, Shenoy said the amendment fundamentally alters the tax treatment for investors who acquired SGBs from the market rather than through primary issuance.

“Holy moly! If you buy SGBs in the market (not from primary issuance) you will pay full tax on capital gains when the bond is redeemed! This is from April 1, 2026,” Shenoy wrote, describing the move as “very negative for SGBs if you have bought in the market.”

Under current understanding, capital gains on SGBs held until maturity are exempt from tax, a feature that made the government-backed gold instrument attractive for long-term investors, including those buying older tranches on exchanges at a premium. The proposed amendment narrows that exemption strictly to original subscribers, effectively bringing secondary market buyers under the regular capital gains tax regime at redemption.

Traders in shock, several seek clarity on proposed SGB rule change

Reacting to Shenoy's post, other X users highlighted that the change could upend market pricing of SGBs. “That’s a killer blow. Likely will kill the excessive premium that SGBs command,” one user said, pointing to the premium investors often pay over gold prices to access tax-free returns.

Other users also raised concerns about retrospective impact on investor behaviour, many of them appeared to seek clarity on the proposed change. “So for someone who bought it in secondary market, selling it now will have capital gains?" asked another user, while a third commented with irony: "Buy in the market, hold for years, then pay full tax at redemption."

In a strongly worded reaction, another X user wrote: “Brilliant way to reward long-term investors. I don’t even trust the government now; next would be the provident fund. Terrible.”