Capital gains arising on redemption of Sovereign Gold Bonds (SGBs) by an individual investor at maturity (8 years) are completely exempt from tax under Section 47(viic). The annual interest on SGBs (2.5% p.a.) is taxable, but the capital appreciation on the gold price is entirely tax-free at maturity.
Tax Treatment
- Capital gains on redemption at maturity (8 years): Fully exempt under Section 47(viic)
- Capital gains on early redemption (after 5 years, on RBI buyback dates): Exempt for original subscribers
- Transfer on stock exchanges before maturity: Long-term capital gains taxable at 12.5% (if held > 12 months)
- Annual interest @ 2.5% p.a. on initial investment: Fully taxable as income from other sources
Why It's Attractive
- Gold price appreciation (historically 10-12% CAGR) is entirely tax-free at maturity
- No GST, no making charges, no storage risk — unlike physical gold
- Current SGB series may not be available (GOI paused new issuances) — existing bonds can still be traded on BSE/NSE
- TDS is not applicable on SGB interest — but must be declared in ITR
This guide reflects FY 2025-26 (AY 2026-27) and is for general information. Tax rules and limits change, and how they apply depends on your circumstances. It is not professional tax advice; consult a qualified Chartered Accountant before acting.
