Union Finance Minister Nirmala Sitharaman presented the Budget 2026-2027 on Sunday, February 1, and among several significant announcements that got significant attention,
one was the implementation of capital gain taxes on Sovereign Gold Bonds (SGB) if an investor does not buy them from the Reserve Bank of India (RBI) directly after years of being tax-free.
So, if you buy SGB from a third party, you will have to pay capital gain taxes on your profit.
What Are Sovereign Gold Bonds (SGBs)?
Sovereign Gold Bonds (SGBs) are government-issued securities valued in grams of gold, offering an alternative to owning physical gold. Investors purchase these bonds by paying the issue price in cash, and upon maturity after eight years, the bonds are redeemed in cash. Currently, any capital gains earned from these bonds are not subject to tax.
Budget 2026: Capital Gains Tax Changes For SGBs
Under the new rules, only SGBs acquired directly from the RBI during their initial issue and held continuously until maturity will remain exempt from capital gains tax. “It is also proposed to provide that this exemption applies uniformly to all issuances of Sovereign Gold Bonds by the Reserve Bank of India,” an official Budget statement clarified.
Tax-Free Investments In India: What Still Qualifies
Although SGBs were often labelled tax-free, they were already taxable if redeemed before maturity, and the 2.5 per cent annual interest earned was also taxable. True EEE (Exempt-Exempt-Exempt) investments, where contributions, interest, and withdrawals are free from tax, remain limited in India.
Popular Tax-Free Investment Options
Public Provident Fund (PPF): PPF accounts can be opened with banks or post offices with a minimum of Rs 500 and a maximum of Rs 1.5 lakh per year. Investments have a 15-year lock-in, extendable in five-year blocks.
Sukanya Samriddhi Yojana (SSY): Aimed at securing the future of girl children, SSY offers high interest rates and can be opened by parents of girls below 10 years. Funds can be used for education or marriage.
Employees Provident Fund (EPF): Companies with more than 20 employees must contribute to EPF accounts, matching employee contributions. EPF can be withdrawn for retirement or certain life events, such as marriage.
Other options like specific ULIPs and ELSS schemes also fall under the EEE category, offering investors genuine tax-free growth.
