A Sovereign Gold Bond (SGB) is issued by the RBI on behalf of the Government of India and has two taxable events. The 2.5% p.a. interest is added to your income and taxed at your slab (no TDS). Capital gains on redemption at 8-year maturity are fully exempt for an individual holding the bond till maturity (Section 47(viic)). But if you exit early — a secondary-market sale or premature redemption — capital gains apply: 12.5% LTCG if held over 12 months, or slab-rate STCG if held less. No new SGB tranches have been issued since February 2024; existing bonds continue and trade on NSE/BSE.
SGB Tax Treatment — Interest & Capital Gains
SGB has just two income streams and each is taxed differently. Interest is ordinary income; capital gains depend entirely on how you exit — hold to maturity and the gain is tax-free, exit early and it is taxable.
| Event | Tax treatment | Rate | TDS |
|---|---|---|---|
| Interest (2.5% p.a.) | Income from Other Sources at slab | Slab | No TDS |
| Redemption on maturity (8 years) | Capital gains exempt u/s 47(viic) | Nil | — |
| Premature redemption (after 5 yrs) — held > 12 mo | LTCG, no indexation | 12.5% | No TDS |
| Secondary-market sale — held > 12 mo | LTCG on listed security | 12.5% | No TDS |
| Sale / exit — held ≤ 12 mo | STCG added to income | Slab | No TDS |
SGBs are listed securities, so the long-term threshold is more than 12 months. LTCG rate 12.5% (no indexation) applies to transfers on/after 23 Jul 2024.
The Section 47(viic) exemption applies to redemption on maturity. From FY 2026-27 it is confined to the original subscriber holding the bond continuously till maturity — someone who buys an SGB in the secondary market and redeems it does not get the exemption and pays 12.5% LTCG. Any sale before maturity (on the exchange or premature RBI redemption) is always a taxable capital-gains event.
Why SGB Gains Are Tax-Free on Maturity
Gold prices typically rise over an 8-year horizon, so the redemption value is well above what you paid. Under Section 47(viic) that entire capital gain is not treated as a transfer when an individual redeems the SGB at maturity — making it the single biggest tax edge over physical gold or a Gold ETF, where the same gain would attract 12.5% LTCG.
- 1Buy at issueIssue price linked to 999-gold average
- 2Hold 8 yearsEarn 2.5% interest each year
- 3Redeem at maturityRBI pays out at prevailing gold price
- 4Capital gainFully exempt u/s 47(viic)
Maturity vs Early Exit — the Tax Difference
Say you subscribed to 100 g at ₹6,000/g (₹6,00,000) and the value at exit is ₹9,00,000 — a ₹3,00,000 capital gain. Interest received is taxed at slab in both cases; only the gain treatment differs.
Held to maturity (8 yrs)
Sold early on exchange
You still report the 2.5% interest under Income from Other Sources each year and file it in your ITR. Estimate your slab tax on the interest with the income-tax calculator.
Unlike physical gold, an SGB pays you 2.5% a year and tracks the gold price. The interest is fully taxable, but for a buy-and-hold investor the tax-free maturity gain usually outweighs the slab tax on interest. SGB also counts towards long-term wealth, not Section 80C — there is no deduction for the amount you invest.
SGB vs Gold ETF vs Physical Gold
The right gold route depends on your holding horizon and appetite for storage. SGB wins on tax and income for long holders; ETFs win on liquidity.
| Feature | Sovereign Gold Bond | Gold ETF / Fund | Physical Gold |
|---|---|---|---|
| Yearly income | 2.5% interest | None | None |
| Gains at maturity / long hold | Exempt on 8-yr maturity | 12.5% LTCG | 12.5% LTCG |
| Long-term holding period | > 12 months (listed) | > 12 months (listed ETF) | > 24 months |
| Buying cost / GST | None | Expense ratio ~0.5% | 3% GST + making charges |
| Storage risk | None — demat | None — demat | Theft / locker |
| Liquidity | Moderate — NSE/BSE | High — daily | High — sell anytime |
Gold ETF / gold-fund holding periods and rates reflect post 23-Jul-2024 rules; verify fund-specific treatment before selling.
SGB held to maturity
- Capital gains exempt u/s 47(viic)
- 2.5% p.a. interest on top
- No storage cost or GST
- Best for 8-year buy-and-hold
SGB sold early / secondary
- LTCG on gains if held > 12 months
- Slab STCG if held ≤ 12 months
- No maturity exemption
- Useful if you need liquidity
Redeemed or sold SGBs this year? Get the interest and any capital gain reported correctly.
File ITR with a CA →SGB — Key Details & Current Status
| Parameter | Details |
|---|---|
| Issuer | RBI on behalf of the Government of India |
| Denomination | Grams of gold (999 purity equivalent) |
| Interest | 2.50% p.a. on issue price, paid semi-annually (taxable) |
| Tenure | 8 years; premature redemption from the 5th year on interest dates |
| Minimum / Maximum | 1 gram / 4 kg per individual per financial year (20 kg for trusts) |
| Eligible investors | Resident individuals, HUFs, trusts, universities, charitable institutions |
| Trading | Listed on NSE/BSE — buy/sell in the secondary market |
| New issuance | No fresh tranche since Feb 2024 (last: 2023-24 Series IV) |
The scheme has not been re-opened for FY 2025-26 / FY 2026-27; existing bonds continue and remain tradable on the exchanges.
RBI has not announced a fresh SGB tranche since February 2024. You can still buy existing bonds on NSE/BSE, but a secondary-market buyer does not get the maturity capital-gains exemption from FY 2026-27, and market prices can trade at a premium or discount to the underlying gold value. Weigh this against a Gold ETF before buying an SGB on the exchange today.
✓SGB suits you if
- You can hold for the full 8-year maturity
- You want gold exposure plus 2.5% interest
- You want a tax-free maturity gain
- You prefer demat over physical storage
!Reconsider if
- You may need to exit within a few years
- You are buying second-hand and want the exemption
- You need same-day liquidity — an ETF is deeper
- You are chasing an 80C deduction — SGB has none
- Capital-gains exemption on redemption: Section 47(viic), Income-tax Act, incometax.gov.in
- LTCG rate 12.5% without indexation (Budget 2024, eff. 23 Jul 2024)
- Scheme terms, interest & premature redemption: rbi.org.in
- Issuance status: no new tranche since 2023-24 Series IV (Feb 2024)
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.