Not just F&O traders: FM Sitharaman has disappointing news for Sovereign Gold Bond investors too!

Sovereign gold bonds: The Union Budget 2026 did not just deliver a setback for the Indian stock market traders dealing in the futures and options (F&O), but also spelt new taxation rules for the Sovereign Gold Bonds, increasing the taxation burden for the investors who did not subscribe to the original issue.

According to the proposal announced in Budget 2026 by Finance Minister Nirmala Sitharaman, the capital gains tax exemption on SGBs will only be available to investors who subscribed to the original issue and held till maturity.

In her Budget speech, FM Sitharaman said that it is proposed to provide that the exemption from capital gains tax in respect of Sovereign Gold Bonds shall be available only where such bonds are subscribed to by an individual at the time of original issue and are held continuously until redemption on maturity.

It is also proposed to provide that this exemption applies uniformly to all issuances of Sovereign Gold Bonds by the Reserve Bank of India, FM said.

How were SGBs taxed originally?

For years, SGBs ranked among India’s most tax-efficient investments, offering 2.5% annual interest and full capital gains tax exemption at maturity.

Most tax experts argued that any individual holding an SGB at the time of redemption (maturity) was exempt from capital gains tax, regardless of whether they bought it from the government or the exchange.

But this is not true anymore. Applicable from April 1, the FM has announced that the capital gains tax exemption will only apply to those investors who bought the issue originally and held it at redemption.

If an investor bought the SGB from the secondary market, the exemption is no longer applicable. When redeemed at maturity, the SGB will attract a tax on capital gains made from April 1, 2026. Investors who bought SGBs from the exchanges and plan to hold them till maturity need to consider the said tax hit.

The tax on short-term capital gains is 20%, and on long-term capital gains is 12.5%.

Reacting to the development, Capitalmind CEO Deepak Shenoy said that this development will be "very negative for SGBs if you have bought in the market".

SGBs were introduced by the government to dissuade people of the country, one of the largest gold importers in the world, from investing in physical gold. The rally in gold prices over the past year has led to reports of the impressive gains which investors stand to make. Gold prices jumped 70% last year and gained 12% so far this month before the two-day crash.

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