Tax on Sovereign Gold Bonds (SGB) — Interest, Capital Gains & Maturity Exemption 2026-27

Updated: 3 June 2026 | Income-tax Act, 2025 | Verified against RBI and CBDT notifications

SGB interest (2.5% p.a.) is fully taxable at slab rate. Capital gains on maturity (8 years) via RBI redemption are completely exempt — no LTCG tax. Premature exit via RBI window (5th year+) is also exempt. Exchange-traded SGB gains: LTCG 12.5% (12+ months held) or STCG 20% (under 12 months).

0% TAX

Zero capital gains tax on SGB maturity — unique benefit among all gold investments
Physical gold, gold ETFs, and gold funds have no such maturity exemption. Only SGBs offer complete capital gains exemption at maturity.

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Interest is still taxable. The 2.5% annual SGB interest is taxed at your income tax slab rate — it is not tax-free. Only the capital appreciation (gold price gain) at maturity is exempt. Declare SGB interest as "Income from Other Sources" every year.

SGB Tax Treatment — All Scenarios

Scenario	Tax Treatment	Applicable Rate
SGB Interest (2.5% p.a.)	Taxable as "Income from Other Sources"	At applicable income tax slab rate
TDS on SGB Interest	TDS deducted at source by RBI if interest > ₹10,000/year	10% TDS
Maturity Redemption (8 years, RBI)	Capital gains fully exempt under Section 47	0% — Fully Exempt
Premature Redemption (5th year+, RBI window)	Capital gains exempt — same as maturity exemption	0% — Fully Exempt
Exchange Sale — LTCG (held > 12 months)	Long-Term Capital Gain on listed securities	12.5% without indexation
Exchange Sale — STCG (held ≤ 12 months)	Short-Term Capital Gain on listed securities	20% flat rate
Transfer / Gift of SGBs	If from close relative — no capital gains to transferor; recipient inherits cost basis	Exempt (gift from relative)

SGB vs Physical Gold vs Gold ETF — Tax Comparison

Feature	Sovereign Gold Bond	Physical Gold	Gold ETF / Fund
Annual Interest / Income	2.5% p.a. — taxable at slab	None	None
Maturity / Long-Hold Gain	0% — Fully Exempt (8 yr)	12.5% LTCG after 24 months	12.5% LTCG after 24 months
Short-Term Gain	Slab rate (under 12 months exchange)	Slab rate (under 24 months)	20% (under 24 months)
Indexation	Not applicable (no LTCG at maturity)	Not available (post-Budget 2024)	Not available (post-Budget 2024)
TDS	10% on interest if > ₹10,000	1% TDS on sale > ₹1 lakh (jeweller)	None
GST on purchase	No GST	3% GST + making charges	No GST
Best for	Long-term tax-efficient gold exposure	Jewelry / physical possession	Liquidity, no storage risk

SGB Interest — How to Declare in ITR

SGB interest must be declared annually under "Income from Other Sources" in your ITR — even if TDS was deducted. The interest payment dates are typically in January and July (semi-annual at 2.5% p.a.). Check your Form 26AS and AIS to verify the TDS reflected. If no TDS was deducted (interest below ₹10,000), you are still required to declare the interest income.

Using the RBI Premature Exit Window Smartly

TAX EXEMPT

Premature Exit via RBI Window (5th Year Onwards)

Available on coupon payment dates from the 5th year of holding. Capital gains are fully exempt — treated like maturity redemption. This is the most tax-efficient way to exit before 8 years. Requires submitting a request through your registered bank/SHCIL/broker before the window opens.

TAXABLE

Selling on BSE/NSE (Any Time)

SGBs listed on stock exchanges can be sold any time. However, gains are subject to capital gains tax — LTCG 12.5% if held 12+ months, STCG 20% if held under 12 months. Market price on exchange may differ from RBI's redemption price. Liquidity on exchanges is often low for older SGB tranches.

Act mapping note: The SGB maturity capital gains exemption under Section 47 of the Income Tax Act, 1961 is carried forward in the Income-tax Act, 2025. The exchange-trading capital gains rates (LTCG 12.5%, STCG 20%) were updated by Finance Act 2024 and apply from AY 2025-26 onwards. Indexation benefit was removed for all gold assets in Budget 2024.

Frequently Asked Questions

Is SGB maturity gain completely tax-free?

Yes, completely. Capital gains arising on redemption of Sovereign Gold Bonds at maturity (after 8 years) through the RBI redemption window are fully exempt from income tax under Section 47 of the Income Tax Act. There is no LTCG tax, no indexation calculation required, and no reporting needed as capital gains. This is the single biggest tax advantage of SGBs over all other forms of gold investment. The exemption applies regardless of the appreciation in gold prices.

Is TDS deducted on SGB interest?

TDS is deducted by RBI on SGB interest at 10% if the total interest in a year exceeds ₹10,000. The 2.5% per annum interest is paid semi-annually by the government. If your annual interest from all SGBs is ₹10,000 or less, no TDS is deducted. The interest is credited to your registered bank account, and TDS (if any) is reflected in Form 26AS. You must declare this interest as "Income from Other Sources" in your ITR regardless of TDS.

What is the tax on selling SGBs on the stock exchange before maturity?

SGBs listed on BSE/NSE can be sold before maturity. The tax treatment depends on holding period: if held for more than 12 months, the gain is Long-Term Capital Gain (LTCG) taxed at 12.5% without indexation under Budget 2024 rules. If held for 12 months or less, it is Short-Term Capital Gain (STCG) taxed at 20% from FY 2024-25 onwards. Note: indexation benefit was available for SGBs held before the Budget 2024 change; for new purchases, only 12.5% LTCG rate applies.

Can I exit SGB before 8 years without tax?

Partial exit through the RBI premature redemption window is available from the 5th year anniversary onwards on the coupon payment dates. Capital gains on premature redemption via the RBI window are also exempt from tax — this is an extension of the maturity exemption. However, if you sell on a stock exchange before 5 years, standard capital gains tax applies (LTCG 12.5% or STCG 20%). The RBI premature exit window is therefore the tax-smart way to exit SGBs early.

How are SGBs taxed compared to physical gold and gold ETFs?

SGBs: Interest taxable at slab rate; maturity/RBI-exit gains completely exempt; exchange trading gains at LTCG 12.5% / STCG 20%. Physical gold: No interest income; LTCG 12.5% without indexation (post-Budget 2024) on sale after 24 months; STCG at slab rate under 24 months. Gold ETFs/Funds: No interest; LTCG 12.5% without indexation after 24 months; STCG at 20% under 24 months. SGBs win on capital gains tax at maturity — physical gold and gold ETFs have no maturity exemption.

Capital Gains Tax LTCG Tax Income from Other Sources Tax on FD Interest Income Tax Slabs 2026-27 Form 26AS

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