Sovereign Gold Bonds (SGB): interest rate, tax at maturity after Budget 2026, and how to buy
SGBs give you gold price appreciation plus 2.5% annual interest — and original subscribers pay zero capital gains tax at 8-year maturity. But Budget 2026 changed the rules: secondary market buyers no longer get the exemption. No new tranches are available in FY 2026-27. Here's what to do now.
All figures and facts in this article are sourced directly from primary government and regulatory publications — including the Reserve Bank of India, SEBI, EPFO, the Income Tax Department, PFRDA, and IRDAI — and verified before publication. No claim is published from a single source without corroboration.
For informational purposes only. SGB tax rules changed in Budget 2026 — the capital gains exemption at maturity now applies only to original subscribers holding until redemption. Verify current rules at rbi.org.in and incometax.gov.in before acting.
Sovereign Gold Bonds (SGBs) are government securities denominated in gold. When you buy an SGB, you are effectively buying gold — but in paper/digital form, issued by the Reserve Bank of India on behalf of the Government of India. You earn a fixed interest rate on top of any gold price appreciation, pay no storage charges, and at maturity, original subscribers pay no capital gains tax on price appreciation.
This guide explains how SGBs work, the current issuance status, the tax treatment (which changed in Budget 2026), and how they compare to physical gold and gold ETFs.
Current issuance status: no new tranches in FY 2026-27
Important: No new Sovereign Gold Bond tranches have been announced for FY 2026-27. The government has effectively paused new SGB issuances, citing the high cost of the scheme (the government pays 2.5% annual interest plus absorbs any gold price appreciation above the issue price — an expensive liability when gold prices are rising).
Existing SGBs can still be bought on the secondary market — they trade on NSE and BSE. However, purchasing on the secondary market now has a significant tax implication (covered below).
Source: SGB scheme, RBI
How SGBs work: the basics
- Denomination: In grams of gold. Minimum purchase: 1 gram. Maximum: 4 kg per financial year for individuals.
- Pricing: Issue price is set by RBI based on the simple average of the closing price of 999-purity gold over the 3 business days preceding the subscription period. Online buyers receive ₹50/gram discount.
- Tenure: 8 years. Exit option available from Year 5 onward on interest payment dates (every 6 months).
- Interest: 2.5% per annum on the face value (the issue price per gram × number of grams), paid semi-annually.
- Holding: Held in demat form (if you have a demat account) or as a Certificate of Holding issued by RBI. No physical gold changes hands.
Returns: interest plus gold price appreciation
Your total return from an SGB has two components:
Component 1: Fixed interest
2.5% per annum on the face value (not the current market value of gold). This is paid every 6 months into your bank account.
Example: You buy 10 grams at an issue price of ₹7,200/gram.
Face value: ₹72,000.
Annual interest: 2.5% × ₹72,000 = ₹1,800/year.
Semi-annual payment: ₹900 every 6 months.
Component 2: Gold price gain (or loss)
At maturity (8 years), you receive the redemption amount based on the gold price at that time. If gold was ₹7,200/gram when you bought and is ₹15,000/gram at maturity, you receive ₹1,50,000 for 10 grams — a gain of ₹78,000.
Unlike interest, this gain has always been the tax-free component for original subscribers holding to maturity. But this changed in Budget 2026.
Tax treatment after Budget 2026
Interest income (unchanged):
The 2.5% interest is taxable as "Income from Other Sources" at your applicable slab rate, every year when received. This has always been the case.
Capital gains at maturity — original subscribers:
If you subscribed to an SGB directly from RBI at the time of issue (primary market) and hold it continuously until the 8-year maturity date, the capital gain at maturity is fully exempt from capital gains tax. This was confirmed in Budget 2026.
Capital gains — secondary market buyers:
From April 1, 2026, SGBs purchased on the secondary market (NSE/BSE) are no longer eligible for the capital gains exemption at maturity, even if held until the original maturity date.
If you buy an SGB on NSE today (secondary market), any capital gain on redemption is taxable. If held for more than 24 months: LTCG at 12.5% (the standard capital gains rate for debt/listed securities). If held for 24 months or less: STCG at slab rate.
Premature exit (from Year 5, original subscribers):
Exit through the RBI window (on scheduled interest payment dates from Year 5): taxable as LTCG (since held > 3 years). Not eligible for the maturity exemption.
Exit on secondary market exchange: taxable as capital gains per standard rules.
Source: SGB capital gains tax post-Budget 2026, ClearTax
SGBs vs physical gold vs gold ETF
| SGB (original subscriber, held to maturity) | Physical gold | Gold ETF | |
| Returns | Gold price change + 2.5% interest p.a. | Gold price change only | Gold price change minus ~0.3–0.5% expense ratio |
| Tax on gains | Capital gains exempt at maturity | LTCG at 12.5% after 2 years | LTCG at 12.5% after 2 years |
| Tax on interest/income | Interest taxable at slab rate | None | None |
| Storage risk | None | Yes (locker cost, theft risk) | None |
| Making charges | None | 5–15% on jewellery | None |
| Liquidity | Secondary market or RBI window from Year 5 | Immediate | T+1 on exchange |
| Purity risk | None (government-backed) | Risk of impure gold | None |
| New issuances | Paused (FY 2026-27) | N/A | Available at any time |
The SGB advantage: For original subscribers holding to maturity, SGBs give you the gold price return + 2.5% annual interest + zero capital gains tax at maturity. This is significantly better than physical gold (no interest, storage costs) or gold ETFs (expense ratio, LTCG taxable).
The SGB disadvantage: 8-year lock-in (with partial exit from Year 5). No new primary issuances available currently. Secondary market purchases lose the capital gains exemption.
If you want gold exposure now: what to do
Since new SGB tranches are not available, your options for gold exposure are:
Option 1: Secondary market SGBs (NSE/BSE)
Existing SGBs trade on exchanges. You can buy them at market prices. Note: capital gains are now taxable (no maturity exemption for secondary buyers). The 2.5% interest is still attractive compared to gold ETFs. Check that the remaining tenure to maturity aligns with your investment horizon.
Option 2: Gold ETFs
Track physical gold prices with ~0.3–0.5% annual expense ratio. No lock-in. LTCG taxable at 12.5% after 24 months. Listed on NSE/BSE, T+1 redemption. A practical alternative if you want liquid gold exposure without the SGB lock-in.
Option 3: Wait for primary SGB issuance
If the government resumes new SGB tranches (no announcement as of May 2026), subscribing at the primary issue restores the capital gains exemption at maturity. Worth monitoring.
⚠ Common mistake: Assuming that buying SGBs on NSE/BSE gives the same tax treatment as subscribing at primary issue. Since Budget 2026, it does not — secondary market buyers pay capital gains tax at maturity. The tax advantage is reserved for original subscribers who hold to the 8-year maturity.
For SGBs you already hold: the premature redemption window
Multiple SGB tranches are eligible for premature redemption in April–September 2026 (those in their 5th year or later). If you hold existing SGBs and want to exit, check your tranche's scheduled premature redemption dates with your bank or demat account holder.
Premature redemption through the RBI window: price is based on the simple average of the previous week's gold closing price. Capital gains from premature exit are taxable (LTCG at 12.5% for original subscribers, since the maturity exemption applies only to 8-year maturity).
Bottom line
- SGBs pay 2.5% annual interest (taxable) plus gold price appreciation (capital gains exempt at 8-year maturity for original subscribers)
- No new primary SGB tranches available as of May 2026; secondary market purchases lose the capital gains exemption (Budget 2026)
- For gold exposure today: secondary market SGBs (2.5% interest, taxable gains) or gold ETFs (no interest, taxable LTCG, more liquid)
- For original SGB holders: the 8-year maturity capital gains exemption remains intact — no change for existing holdings
Frequently asked questions
Q: I bought SGBs in 2019 through primary subscription. Am I still eligible for the capital gains exemption at maturity?
A: Yes. The Budget 2026 change affects secondary market buyers, not original subscribers. Your 2019 SGB held continuously to maturity (2027) is still eligible for capital gains exemption.
Q: Can I use SGBs as collateral for a loan?
A: Yes. SGBs can be used as collateral for loans against securities from banks. The loan-to-value (LTV) is set by RBI and is typically 75% of the market value of gold.
Q: Is the 2.5% interest paid on the issue price or the current gold price?
A: The issue price at the time of subscription. If gold prices have risen significantly since you bought, the 2.5% interest looks lower relative to current gold prices — but in absolute rupees, you receive a fixed 2.5% on the price you paid.
Q: If I gift my SGB to a family member, does the capital gains exemption transfer?
A: No. The exemption applies only to the original subscriber who holds until maturity. If you gift, sell, or transfer the SGB, the recipient does not inherit the exemption — they are treated as secondary market holders for capital gains purposes.
Sources: SGB scheme, RBI · SGB FAQ, RBI · SGB capital gains tax post-Budget 2026, ClearTax
Last verified: May 2026. SGB issuance, tax rules, and premature redemption schedules are subject to government and RBI announcements. Verify at rbi.org.in.
Content on Ek Crore is for educational purposes only. Nothing here is financial advice. Always consult a SEBI-registered advisor, CA, or qualified professional before making investment or tax decisions.