Union Budget 2026-27: Govt Restricts Capital Gain Exemption on Sovereign Gold Bonds to Original Buyers

In a move to eliminate the tax benefit for the secondary market buyers, the Government has proposed to restrict the capital gains tax exemption on Sovereign Gold Bonds (SGBs) only to the Original SGB buyers who held them until maturity.

The Sovereign Gold Bonds (SGBs) are issued by the Reserve Bank of India (RBI) under the Sovereign Gold Bond Scheme, 2015. These bonds are issued in multiple series, each treated as a separate issuance.

At present, capital gain earned from the redemption of SGBs is tax exempt under Section 70(1)(x) of the Income Tax Act. The exemption applies to both the original buyers and the second-market buyers. However, the secondary market buyers were using this loophole just to claim the tax-free gains, which was not the main intent of SGBs.

Therefore, to ensure that the scheme works as a long-term saving tool instead of a speculative trading asset, the government in Budget 2026 proposed to amend Section 70(1)(x) to clarify that the capital exemption arising from the redemption of SGBs will be available only when the SGB is subscribed to by a subscriber at the time of original issue and is held continuously until maturity.

These amendments will apply from April 1, 2026, for the tax year 2026-27 and the subsequent tax years.