What are the tax implications of investing in SGBs

Until 31st March 2026, if you hold your Sovereign Gold Bonds (SGBs) until maturity, i.e. 8 years or until the lock-in period of 5 years, any profit you make at the end is completely tax-free. Yes, zero capital gains tax 

Tax on SGB Redemption (At Maturity or After 5 Years) 

• If you redeem your SGBs at maturity (after 8 years) → no capital gains tax 
• Even if you redeem them early after 5 years (as allowed by the government) → still no capital gains tax 

So if you hold on long enough, taxes don’t eat into your returns.

Tax on Capital Gains If You Sell Before Maturity 

If you sell your SGBs before maturity, capital gains tax applies. 

• Held for less than 1 year: You pay short-term capital gains (STCG) tax,  taxed as per your income tax slab 
• Held for more than 1 year: You pay long-term capital gains (LTCG) tax, at 12.5% (without indexation)

Tax on Interest Earned from SGBs 

Now, coming to interest earned on SBG. SGBs pay you 2.5% interest per year, paid every 6 months. 

• This interest is added to your total income. 
• It is taxed as per your income tax slab 

For example, if you’re in the 30% tax bracket, your SGB interest is taxed at 30%. There is no TDS on this interest. So when you file your income tax return, you must declare it under “Income from Other Sources.”

Do SGB get indexation benefit?

No, SGBs do not get any indexation benefit, as they were completely removed in Union Budget 2024.

Note:

From 1st April 2026, the tax rules will have changed. If you buy the SGB from secondary market, you will no longer benefit from tax-exemption status. Click here to learn about changes in SBG taxation made in Budget 2026.