Is Sovereign Gold Bond maturity amount taxable?

No. The capital gains arising on redemption of Sovereign Gold Bonds (SGBs) by an individual investor at maturity (after 8 years) are completely exempt from income tax under Section 47(viic) of the Income Tax Act. This means if you hold an SGB from issue to maturity and redeem it through the RBI at the redemption price, any gain — regardless of the gold price appreciation — is fully tax-free. However, the annual 2.5% interest paid on SGBs is taxable as income from other sources at your applicable slab rate. TDS is not deducted on the interest, but you must report it in your ITR.

What is the tax if I sell Sovereign Gold Bond on the stock exchange before maturity?

If you sell your SGB on a stock exchange (NSE/BSE) before 8-year maturity, capital gains tax applies based on your holding period. If held for less than 24 months (2 years), it is Short-Term Capital Gain (STCG) — taxed at your income tax slab rate. If held for 24 months or more, it is Long-Term Capital Gain (LTCG) — taxed at 12.5% without indexation (post-Budget 2024) or 20% with indexation (if acquired before 23rd July 2024). SGBs sold on the exchange are treated as non-equity assets, so they follow debt/gold fund tax treatment, not equity tax treatment.

Can I take a loan against Sovereign Gold Bonds?

Yes. SGBs can be used as collateral for loans from banks, financial institutions, and Non-Banking Financial Companies (NBFCs). The Loan-to-Value (LTV) ratio is determined by the RBI's directions on gold loans and is typically up to 75% of the SGB value at the prevailing gold price. Taking a loan against SGBs does not trigger any capital gains tax event — you are not selling the bonds, just pledging them. This makes SGBs an especially useful instrument if you need liquidity without selling the underlying gold investment and without losing the tax-free maturity benefit.

Income Tax

Sovereign Gold Bond Taxation India 2025 — Interest, Capital Gains & Maturity Tax Guide

Reviewed by CA Nikhil Gupta · Last reviewed 15 June 2026

Sovereign Gold Bond Taxation — Interest, Capital Gains & Maturity Tax

By CA Nikhil Gupta Updated Jun 2025 Post-Budget 2024 Capital Gains

Sovereign Gold Bonds (SGBs) are among the most tax-efficient gold investment vehicles in India — but only if you understand the rules. The 2.5% annual interest is fully taxable. Capital gains on exchange sales follow debt asset rules. But hold to 8-year maturity and all capital gains are completely exempt. This guide breaks down every SGB tax scenario, the impact of Budget 2024 capital gains changes, and how SGBs compare to Gold ETFs and physical gold on tax.

What Are Sovereign Gold Bonds — Quick Recap

Sovereign Gold Bonds are government securities denominated in grams of gold, issued by the Reserve Bank of India on behalf of the Government of India. Key features:

Denomination: 1 gram of gold (minimum purchase 1 gram, maximum 4 kg per individual per FY)
Annual interest: 2.5% per annum on the issue price, paid semi-annually
Tenor: 8 years with an exit option from year 5 (via RBI buyback on coupon payment dates)
Listed on NSE/BSE: can be sold in secondary market at any time
Redemption: at the average closing price of gold (24-carat) over the last 3 working days before redemption date

The tax treatment of SGBs is split across three scenarios: interest income, capital gains on exchange sale, and capital gains at maturity.

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Tax on SGB Interest — 2.5% Annual Income

The 2.5% interest paid semi-annually is fully taxable as income from other sources at your applicable income tax slab rate. Key points:

No TDS deducted by RBI/government on the interest payment
You must self-declare this interest in your ITR under "Income from Other Sources"
Interest is calculated on the original issue price (not current market price)
Interest income cannot be set off against capital losses from other investments

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Don't Miss Reporting: Many SGB investors forget to report the 2.5% interest in their ITR since no TDS is deducted. The interest is reflected in your Form 26AS and AIS (Annual Information Statement) — income tax scrutiny often flags unreported SGB interest. Always include it under "Income from Other Sources."

Interest Calculation Example

If you purchased 10 grams of SGB in Series X at an issue price of ₹5,500/gram:

Investment amount: ₹55,000
Annual interest: 2.5% × ₹55,000 = ₹1,375/year
Semi-annual payment: ₹687.50 (twice a year)
Total interest over 8 years: ₹11,000
Tax on interest (at 30% slab): ₹3,300 over 8 years

Note that the interest is fixed on the issue price, not the current gold price — so it does not increase even if gold prices double.

Capital Gains on SGB Maturity — Tax-Free After 8 Years

This is the single most important tax advantage of SGBs. Under Section 47(viic) of the Income Tax Act, capital gains arising from redemption of SGBs by an individual investor at maturity (after 8 years) are completely exempt from income tax.

This exemption applies regardless of:

How much gold prices have appreciated
Your income tax bracket
Whether you were issued the bonds in the primary subscription or bought them on the secondary market
The quantum of gain

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8-Year Maturity = Zero Capital Gains Tax: An investor who bought SGB at ₹3,000/gram and receives ₹7,000/gram at maturity has a gain of ₹4,000/gram — entirely tax-free. The same gain in a Gold ETF or physical gold would attract tax.

Case Study: Suresh's SGB Maturity — Tax-Free Windfall

Retired Professor, Hyderabad — Series I SGBs (2015-16)

Suresh subscribed to the first SGB series in November 2015 at ₹2,684/gram, buying 50 grams (₹1,34,200 investment). In November 2023, his SGBs matured. The RBI redemption price was ₹6,132/gram.

Redemption Received

₹3,06,600

Capital Gain

₹1,72,400

Additionally, Suresh received 2.5% annual interest over 8 years = ₹26,840 (taxed as income from other sources at his slab rate of 20% = ₹5,368 tax paid over 8 years).

The capital gain of ₹1,72,400 was completely exempt under Section 47(viic). If this were a Gold ETF, he would have paid LTCG tax of ₹21,550 (12.5% post-Budget 2024) or ~₹35,000 at 20% with indexation (pre-Budget 2024 method). SGBs saved him over ₹20,000 in tax on capital gains alone.

Capital Gains on SGB Exchange Sale (Before Maturity)

If you sell your SGBs on NSE or BSE before the 8-year maturity, capital gains tax applies. SGBs are treated as non-equity assets (similar to debt mutual funds or gold funds) for capital gains purposes:

Budget 2024 Changes — Effective 23rd July 2024

Holding Period	Tax Treatment (Pre-23 Jul 2024)	Tax Treatment (Post-23 Jul 2024)
Less than 24 months (STCG)	Slab rate tax	Slab rate tax (unchanged)
24 months or more (LTCG)	20% with indexation benefit	12.5% without indexation
SGBs acquired before 23 Jul 2024, held 36+ months	—	Grandfathered: choose 20% with indexation OR 12.5% without

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24-Month Holding Period: For SGBs, the holding period for LTCG classification was reduced from 36 months to 24 months effective July 23, 2024. If you bought an SGB on 1 Jan 2023 and sell it on 2 Jan 2025, it qualifies as LTCG (24 months held).

How Exchange Price Differs from Maturity Price

The stock exchange price of SGBs can differ significantly from the underlying gold price. SGBs often trade at a discount to gold NAV in the secondary market due to liquidity constraints, especially older series with fewer years to maturity. This means you may receive less than the intrinsic gold value if you sell on exchange. Holding to RBI maturity redemption avoids this discount and gets you the full gold price.

Capital Gains on Premature RBI Redemption (Year 5, 6, or 7)

From year 5 onwards, the RBI offers a buyback window on coupon payment dates (every 6 months). Premature redemption through the RBI — as opposed to selling on the exchange — has a different and better tax treatment:

Capital gains from premature RBI redemption are taxable (unlike 8-year maturity which is exempt)
However, indexation benefit is available for premature RBI redemption — this was confirmed by CBDT and has not been removed by Budget 2024
Taxed as LTCG at 20% with indexation (since holding is clearly more than 24 months)

Case Study: Priya's Premature Redemption at Year 5

IT Professional, Pune — SGB Series 2019-20

Priya bought 20 grams of SGB in August 2019 at ₹3,890/gram (₹77,800 total). In August 2024 (year 5), she opted for premature RBI redemption at ₹6,800/gram (₹1,36,000).

Capital gain (nominal): ₹1,36,000 − ₹77,800 = ₹58,200
Cost Inflation Index (FY2019-20): 289; (FY2024-25): 363
Indexed cost: ₹77,800 × (363/289) = ₹97,714
Taxable LTCG with indexation: ₹1,36,000 − ₹97,714 = ₹38,286
Tax at 20%: ₹7,657 (vs ₹7,275 at 12.5% without indexation)

Priya compared both methods and found that in her case, 12.5% without indexation (₹7,275) was marginally cheaper than 20% with indexation (₹7,657). With higher gold appreciation or higher inflation, indexation becomes more valuable. She chose 12.5% without indexation.

SGB vs Gold ETF vs Physical Gold — Tax Comparison 2025

Parameter	SGB (8-yr maturity)	SGB (exchange sale)	Gold ETF / Gold Fund	Physical Gold
Capital Gains at sale	Zero (exempt Section 47)	STCG (slab) or LTCG 12.5%	STCG (slab) or LTCG 12.5%	STCG (slab) or LTCG 12.5%
Holding for LTCG	N/A — maturity is tax-free	24 months	24 months	24 months
Annual interest/income	2.5% — taxable at slab	2.5% — taxable at slab	None (growth only)	None
Making charges / GST	None	None	Expense ratio ~0.5%	Making charges 3–25% + 3% GST
Storage / safety risk	Demat — zero	Demat — zero	Demat — zero	Locker / theft risk
Liquidity	Low (RBI dates only after yr 5)	Exchange — daily	Daily NAV redemption	Jeweller / bank

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Best Tax If you can commit for the full 8 years, SGB maturity is the most tax-efficient gold investment in India — all capital gains are exempt, compared to 12.5% LTCG for Gold ETFs. The 2.5% annual interest is a bonus (even after tax) that physical gold and Gold ETFs don't offer.

SGB Inheritance — Tax on Transfer on Death

SGBs can be transferred to a nominee or legal heir on the death of the bondholder. The tax treatment:

Transfer on death to nominee/heir — no capital gains tax on the transfer itself
The heir's holding period is counted from the original purchase date by the deceased
If the heir holds to the original 8-year maturity date, the maturity redemption is still exempt from capital gains
If the heir sells on exchange, gains are taxed based on the original purchase cost and original purchase date (for holding period calculation)

Demat vs Paper SGBs — Any Tax Difference?

SGBs are issued in both demat and paper (certificate) form. There is no difference in tax treatment — tax rules apply equally to both. However, demat SGBs are easier to sell on the secondary market and to pledge for loans. Conversion from paper to demat is possible through your Demat account provider/NSDL/CDSL by submitting the original certificate and dematerialisation request.

SGB Tax — Key Takeaways

2.5% annual interest is taxable at your slab rate — must be reported in ITR even without TDS
8-year maturity redemption: capital gains fully exempt under Section 47(viic)
Exchange sale: STCG (slab rate) if under 24 months; LTCG at 12.5% if 24+ months
Premature RBI redemption (year 5+): taxable LTCG — choose 20% with indexation or 12.5% without
Nomination update is critical — do it online through your bank/Demat account
SGB is best for 8-year investors; Gold ETF is better if liquidity is needed

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Frequently Asked Questions

No. Capital gains arising on redemption of Sovereign Gold Bonds at maturity (after 8 years) by an individual investor are completely exempt from income tax under Section 47(viic) of the Income Tax Act. Any gain — regardless of gold price appreciation — is fully tax-free at maturity. However, the annual 2.5% interest paid on SGBs is taxable as income from other sources at your applicable slab rate. No TDS is deducted, but you must report it in your ITR.

If you sell your SGB on NSE/BSE before 8-year maturity, capital gains tax applies. If held for less than 24 months — Short-Term Capital Gain (STCG) taxed at your income tax slab rate. If held for 24 months or more — Long-Term Capital Gain (LTCG) taxed at 12.5% without indexation (post-Budget 2024). SGBs acquired before 23rd July 2024 and held for 36+ months may optionally use 20% with indexation if that results in lower tax. Exchange-sold SGBs are treated as non-equity assets, so they follow the debt/gold fund tax treatment.

Yes. SGBs can be used as collateral for loans from banks, financial institutions, and NBFCs. The Loan-to-Value (LTV) ratio is typically up to 75% of the SGB value at prevailing gold prices, per RBI guidelines. Taking a loan against SGBs does not trigger any capital gains tax — you are pledging, not selling the bonds. This preserves the tax-free maturity benefit while providing liquidity.

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