How SGB returns are made up
A Sovereign Gold Bond pays you in two ways. First, its value tracks the price of 24-carat (999) gold, because redemption is paid at the prevailing gold price. Second, it pays a fixed 2.5% a year on the issue price, credited to your bank account every six months. The interest does not grow with the gold price.
Capital gain = Units × (Redemption price − Purchase price)
Total return = Capital gain + Interest − Tax
The redemption price is the simple average of the 999-purity gold closing price published by the India Bullion and Jewellers Association for the three business days before redemption.
SGB tax rules after Budget 2026
| How you exit | Tax on the gain |
|---|---|
| Bought at original issue and held to 8-year maturity | Exempt |
| Bought on the stock exchange, held to maturity | Taxable from 1 April 2026: 12.5% LTCG |
| Early redemption with RBI from year 5 | Taxable: 12.5% LTCG |
| Sold on NSE/BSE after 12 months | 12.5% LTCG, no indexation |
| Sold on NSE/BSE within 12 months | At your slab rate |
The 2.5% interest is taxable every year at your slab rate under 'income from other sources', with no TDS. Budget 2026 limited the maturity exemption to investors who subscribed at the original issue and held the bond continuously until maturity, so secondary-market buyers now pay capital gains tax even at maturity. If you are unsure how this applies to your bonds, check with a tax professional.
Can you still buy SGBs?
The government has not issued a new SGB tranche since February 2024, so new investors can buy only existing series on the NSE or BSE through a demat account. These often trade at a discount or premium to the gold price, which you can enter in the calculator as your purchase price. Because the tax benefit at maturity no longer applies to secondary-market purchases, compare the after-tax return with gold ETFs before buying.
Example
Ten units bought at the original issue for ₹5,000 per gram, held for eight years and redeemed at ₹12,000 per gram: the investment of ₹50,000 becomes ₹1,20,000, plus interest of ₹10,000 (₹1,250 a year). The ₹70,000 gain is tax-free because the bond was held from issue to maturity; the interest is taxed at your slab. Had the same bond been bought on the exchange, the gain would be taxed at 12.5%, costing ₹8,750.
Frequently asked questions
What is the interest rate on Sovereign Gold Bonds?
2.5% a year on the issue price, paid every six months. It stays the same even if gold prices rise.
Is SGB tax-free at maturity?
Only if you subscribed at the original issue and held the bond continuously until maturity. From 1 April 2026, bonds bought on the stock exchange are taxed at maturity too.
Can I redeem SGB before 8 years?
Yes, through RBI's premature redemption window from the fifth year, on interest payment dates, or by selling on the stock exchange at any time. Gains on these exits are taxable.
Are new SGBs being issued?
No new tranche has been issued since February 2024. You can buy existing series on NSE or BSE.
How is SGB interest taxed?
As income from other sources at your slab rate, every year. No TDS is deducted, so you must report it in your return.