The 2.5% p.a. SGB interest is fully taxable as Income from Other Sources at your slab rate. The capital gain on redemption at maturity (8 years) — and on RBI premature exit from the 5th year — is completely exempt under Section 47 for the original individual holder. Only if you sell on the stock exchange before maturity is there capital-gains tax: LTCG 12.5% (held over 12 months, no indexation) or STCG at slab rate (held 12 months or less).
SGB Tax — Every Scenario
Sovereign Gold Bonds have three taxable events — interest, redemption and exchange sale — and each is taxed differently. This table covers them all for FY 2025-26.
| Scenario | Tax treatment | Rate |
|---|---|---|
| SGB interest (2.5% p.a.) | Income from Other Sources | Slab rate |
| TDS on interest | RBI deducts if interest > ₹10,000/yr | 10% |
| Redemption at maturity (8 yr, RBI) | Capital gain exempt u/s 47 — original holder | Exempt |
| RBI premature exit (5th yr onward) | Same exemption as maturity | Exempt |
| Exchange sale — held > 12 months | LTCG on listed security, no indexation | 12.5% |
| Exchange sale — held ≤ 12 months | STCG added to total income | Slab rate |
| Gift / transfer to a relative | No capital gain to transferor; cost carries over | Exempt |
Exemption on redemption applies to the original individual subscriber holding till redemption; a secondary-market buyer who redeems does not get it. Verified on incometax.gov.in for AY 2026-27.
Only the capital appreciation of gold at redemption is exempt. The 2.5% interest is taxable every year, and selling on the exchange before maturity is fully taxable. The exemption also belongs to the original holder — if you bought units on BSE/NSE, redeeming them at maturity does not carry the exemption.
SGB Interest & TDS — How to Declare
SGBs pay 2.5% per annum interest on the issue price, credited half-yearly. This interest is taxable at your slab rate under Income from Other Sources — it is never exempt. RBI deducts 10% TDS only if your total SGB interest in a year exceeds ₹10,000; below that, no TDS is cut but you must still declare the income.
- Declare the full interest each year, even if no TDS was deducted.
- Cross-check the TDS in your Form 26AS and AIS before filing.
- Interest is added to total income and taxed at your applicable slab.
Selling SGBs on the Exchange — Worked Example
SGBs are listed on BSE/NSE, so you can exit before the 8-year maturity by selling on the market — but that sale is taxable, unlike an RBI redemption. Suppose you sell listed SGB units after holding them more than 12 months with a gain of ₹2,00,000.
LTCG — held over 12 months
STCG — held 12 months or less
If you need to exit before 8 years, using the RBI premature redemption window (available from the 5th year on coupon dates) keeps the capital gain exempt, whereas selling on the exchange triggers 12.5% LTCG or slab-rate STCG. Estimate the difference with our income-tax calculator.
Sold or redeemed SGBs this year? Get the interest and any capital gain reported correctly.
File ITR with a CA →SGB vs Physical Gold vs Gold ETF — Tax
On capital-gains tax at exit, SGBs are the most efficient form of gold because of the unique maturity exemption. On other gold assets, gains are taxed under the capital-gains rules without any maturity relief.
| Feature | Sovereign Gold Bond | Physical Gold | Gold ETF / Fund |
|---|---|---|---|
| Annual income | 2.5% interest (taxable at slab) | None | None |
| Gain at maturity / long hold | Exempt at RBI redemption | 12.5% LTCG (24 mo) | 12.5% LTCG (24 mo) |
| Short-term gain | Slab (exchange, ≤12 mo) | Slab (≤24 mo) | Slab (≤24 mo) |
| Indexation | No | No | No |
| GST on purchase | Nil | 3% GST + making | Nil |
Holding period for long-term: 12 months for a listed SGB sold on the exchange; 24 months for physical gold and gold funds. Indexation removed for all gold assets from 23 July 2024.
Hold SGB to maturity / RBI exit
- Capital gain fully tax-free u/s 47
- Only for the original holder
- Best after-tax return on gold
- No capital-gains reporting on the gain
Sell SGB on the exchange
- LTCG 12.5% if held over 12 months
- STCG at slab if held 12 months or less
- Useful for liquidity before year 5
- Market price may differ from RBI value
RBI has not issued a new SGB tranche since February 2024 and the government has signalled it will not launch fresh series. This does not change the tax on bonds you already hold: they continue to earn 2.5% interest, keep the maturity/RBI-exit exemption, and remain tradable on the exchange until they mature.
Frequently Asked Questions
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SGB Interest, Redemption or Sale? File It Right.
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