The Government has proposed a significant clarification in the tax treatment of Sovereign Gold Bonds (SGBs) by amending section 70(1)(x) of the Income-tax Act . The amendment aims to ensure uniform application of the capital gains tax exemption across all issuances of Sovereign Gold Bonds by the Reserve Bank of India (RBI).
Under the existing provision, income arising from the redemption of Sovereign Gold Bonds is exempt from capital gains tax. However, since SGBs are issued in multiple series notified from time to time, questions had arisen regarding the scope and applicability of this exemption, particularly in cases where bonds were acquired through secondary market transactions.
What Has Changed?
The proposed amendment clarifies that the capital gains exemption will be available only if:
- The Sovereign Gold Bond is subscribed at the time of original issue , and
- The bond is held continuously until redemption on maturity .
This condition will apply uniformly to all Sovereign Gold Bonds issued by the RBI, regardless of the series or date of issue.
Impact on Investors
With this amendment, investors who purchase Sovereign Gold Bonds from the secondary market will not be eligible for capital gains tax exemption on redemption. The benefit will be restricted strictly to original subscribers who hold the bonds till maturity.
The move aligns the exemption with its original policy intent, which was to encourage long-term investment in gold through the SGB scheme rather than short-term trading.
Effective Date
The amendment will come into force from 1 April 2026 and will apply from Tax Year 2026-27 onwards, as per Clause 35 of the Finance Bill.
Takeaway
Taxpayers and investors should carefully evaluate their Sovereign Gold Bond investments, especially those acquired through market purchases. Going forward, only original issue subscribers holding SGBs till maturity will enjoy capital gains tax exemption on redemption.
Official copy of the Clause is as follows
Exemption for Sovereign Gold Bond
The provisions of section 70(1)(x) of the Act provide an exemption from capital gains tax in respect of income arising from redemption of Sovereign Gold Bonds issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015. Sovereign Gold Bonds have been issued by the Reserve Bank of India on a recurring basis through multiple series notified from time to time, each constituting a separate issuance.
2. In order to ensure uniform application of the exemption across all such issuances and to align the provision with its intended scope, it is proposed to amend section 70(1)(x) to provide that the exemption shall be available only where the Sovereign Gold Bond is subscribed to by a subscriber at the time of original issue and is held continuously until redemption on maturity, for all Sovereign Gold Bonds issued by the Reserve Bank of India
from time to time.
3. These amendments shall take effect from the 1st day of April, 2026, and shall apply in relation to the tax year 2026-27 and subsequent tax years.
[Clause 35]
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