Budget 2026: Tax Exemption On Sovereign Gold Bonds Only For Individual Investors

The Union Minister of Finance, Nirmala Sitharaman, proposed rationalisation of quite a few direct tax provisions in Budget 2026. The proposed rationalisations are for provisions related to share buyback, tax collection at source (TCS) rates, removal of interest deductions from dividend and mutual fund incomes, and capital gains exemption for sovereign gold bonds (SGBs), among others.

Tax Exemption Only For Individual Subscribers

Although SGBs have not been issued since February 2024, the already issued SGBs are maturing every year. Regarding the existing SGBs and their tax treatment, Sitharaman said in her Budget Speech 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.”

Another proposal in this regard is to provide this exemption uniformly to all SGBs issued by the Reserve Bank of India (RBI).

This clarifies that the capital gain tax exemption in case of all SGB issues is available only for “individual subscribers” and “only when these are not sold until maturity”.

Long-Term Investment

Whether it is tax exemption on maintaining SGBs till maturity, or higher securities transaction tax (STT) on futures (proposed hike from 0.2 per cent to 0.5 per cent) and options (hike from 0.1 and 0.125 per cent to 0.15 per cent), the Budget reflects the government’s focus on long-term investment and not short-term gratification.

Amit Modani, senior fund manager, lead – fixed income, Shriram AMC, says, “Overall, this budget balances growth-oriented spending with fiscal prudence, reflecting a strategy likely to sustain investor confidence and market stability.

Says Sunil Badala, national head of tax, KPMG in India: “Union Budget 2026 delivers a strong, forward‑looking push for the BFSI sector, indicating the government’s commitment to financial stability, deeper capital markets, and simplified tax administration.”

It is important to note that RBI launched the first tranche of SGB in November 2015 and the last in February 2024. In between this period, over 65 tranches were issued, which are maturing every year now.

How Are SGBs Taxed?

SGBs are tax-free when kept till maturity; that is, eight years from the date of issuance. However, the instrument is not illiquid, and investors are allowed to sell their SGBs prematurely. Investors can sell the SGBs in the secondary market if they are held in a demat account. But in that case, the proceeds become taxable.

Notably, these bonds were open for investment not only for resident individual investors and individuals on behalf of a minor, but also for Hindu Undivided Families (HUFs), Trusts, Universities, and Charitable institutions. However, according to the proposed rationalisation in Budget 2026, the tax exemption is available only for individual investors and only when they remain invested in the instrument till maturity.