AMA : Income Tax on Sovereign Gold Bonds (SGBs) in India

Sovereign Gold Bonds or SGBs are government securities denominated in grams of gold. SGBs are an alternative for holding physical gold.

Sovereign Gold Bonds are taxed under the head:

  1. Capital Gains: when redeemed on maturity or sold on the Stock Exchange
  2. Income from Other Sources: for interest earned on SGB

Here’s a read to help you understand Income Tax treatment for Sovereign Gold Bonds.

Still got questions? Ask them below, and we’ll make sure to answer them in the simplest way


So i have bought SGB from the secondary market, but i intend to hold it till maturity. So int will be taxed under other sources, but am I also liable for capital gains?

Hey @Kunal_Sharma,

If the Sovereign gold bonds are held till maturity, the redemption is exempt from capital gains only for individuals.
And the interest earned will be taxable under the head Income from other sources.

Capital Gains comes into the picture only if you sell it in the secondary market.


Are there any deductions I can claim for investing in Sovereign Gold Bonds?

Hi @Joe_Fernandes,

Sovereign Gold Bonds are not eligible for deductions under Chapter VIA. However, if held till maturity they are exempt from capital gains for individual investors.

Why is Gov. (via RBI) issuing SGBs apart from the regular bonds?

(I understand this isn’t tax related, but I’ll be glad if you guys can answer this. :slightly_smiling_face:)

Hey @Augustine_Charly ,

Normally, the SGBs are issued by RBI and guaranteed by government. This is the only form of gold that pays interest. Issuing SGBs not only bring down the demand of physical gold but also track import-export activities. There may be transparent and fair pricing of gold as it is now regulated by RBI.

Unlike physical gold, SGBs are free from theft, risk and holding charges as it is fully backed by Indian government. Black money also plays important role to issue gold bond.

Here you can read the below article for more understanding about SGBs:

I hope, it helps! :slightly_smiling_face:

Hi, I have some questions regarding capital gains tax on SGB for a very long time and it gets complicated every time I try to search.

RBI has mentioned this under their FAQ
“The capital gains tax arising on redemption of SGB to an individual has been exempted.”

  1. If investor decides to redeem their SGB during early maturity (5th year onwards) are we still exempted from capital gains tax or need to hold for full 8 years to get exemption from capital gains tax?

  2. How does one redeem their SGB 5th year onwards if buying during fresh series release via secondary market? Secondary market allows to sell as per the current price but is there any facility to opt for early redemption as RBI mentioned & not trading?

@Saad_C @Divya_Singhvi @Laxmi_Navlani @Kaushal_Soni @AkashJhaveri can you?