Taxpayers with investments in Sovereign Gold Bonds (SGBs) should ensure they report interest and capital gains correctly while filing their Income Tax Returns (ITR) for Assessment Year (AY) 2026-27 before the July 31, 2026, deadline. The applicable tax treatment depends on whether the income is earned as interest, through redemption on maturity, or from selling the bonds before maturity.
For the current filing season, taxpayers should continue to follow the existing income tax rules, as the changes announced in Budget 2026 will apply only from AY 2027-28.
The annual 2.5% interest earned on Sovereign Gold Bonds is fully taxable and must be reported under Income from Other Sources. The interest is taxed according to the investor's applicable income tax slab.
Since SGBs are government securities, no Tax Deducted at Source (TDS) is applicable on the interest under Section 193 of the Income Tax Act.
Capital gains reporting depends on how the investment is exited. If the original subscriber redeems the bonds with the Reserve Bank of India (RBI) on maturity, the capital gains remain exempt under the rules applicable for AY 2026-27. Eligible taxpayers may report the exempt amount under Schedule EI (Exempt Income), wherever applicable.
SGB Transaction | Tax Treatment | ITR Schedule |
Annual 2.5% interest | Taxable as per the applicable income tax slab | Schedule OS |
Redemption on maturity (Original subscriber) | Capital gains exempt | Schedule EI (only if applicable) |
Sale before maturity (Holding period up to 12 months) | Short-term capital gains taxable as per income tax slab | Schedule CG |
Sale before maturity (Holding period exceeding 12 months) | Long-term capital gains taxable at 12.5%, subject to applicable provisions | Schedule CG |
Budget 2026 has changed the tax treatment of Sovereign Gold Bonds for certain investors. Under the new provisions, the capital gains exemption on redemption at maturity will be available only to original subscribers who purchased the bonds directly during RBI issuances and held them until maturity.
Investors who acquired Sovereign Gold Bonds through the secondary market will no longer be eligible for this exemption. Any gains arising on redemption of such bonds will be taxable and will have to be reported under Schedule CG.
However, these provisions will come into effect only from Assessment Year 2027-28 under the Income Tax Act, 2025, and will not apply to ITR filings for AY 2026-27.
Taxpayers investing in Sovereign Gold Bonds should report interest and capital gains under the appropriate ITR schedules while filing returns for AY 2026-27. Since the Budget 2026 amendments are not applicable this year, returns should be filed according to the existing tax rules before the July 31, 2026, deadline.
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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Jul 14, 2026, 12:22 PM IST
Rakesh Deshmukh
Rakesh Deshmukh is a financial content specialist with around 3 years of experience writing impactful content across equities, mutual funds, IPOs, and personal finance. At Angel One, he decodes real-time market trends and breaking news, helping investors and traders stay updated. He also helps investors make informed decisions by simplifying market fundamentals and technical analysis. He holds a bachelor’s degree in commerce.
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