‘Secondary market for SGBs is no longer a tax haven’: CA flags important rule shift from April 1
From April 2026, tax-free redemption will apply only to investors who subscribed to SGBs in the primary issue directly through the Reserve Bank of India (RBI) and hold them till maturity.
- Feb 26, 2026,
- Updated Feb 26, 2026 2:44 PM IST
India’s “tax-free gold” trade is undergoing a structural reset. The secondary market for Sovereign Gold Bond Scheme (SGBs) is set to lose its biggest attraction: tax-free capital gains at maturity for non-original buyers.
In a post on X (formerly Twitter), CA Nitin Kaushik wrote: “The secondary market for SGBs is NO LONGER a tax haven.”
From April 2026, tax-free redemption will apply only to investors who subscribed to SGBs in the primary issue directly through the Reserve Bank of India (RBI) and hold them till maturity.
“If you didn’t buy the bond directly from RBI during the initial issue, the government will tax your price gains at maturity,” Kaushik said, adding that the change effectively creates “two types of investors.”
Two classes of investors
Under the revised framework:
Original subscribers
- 2.5% annual interest
- Tax-free capital gains at maturity
Secondary buyers (exchange purchases or transfers)
- 2.5% annual interest
- Long-term capital gains tax payable at maturity
“Once the bond changes hands through the stock exchange or even as a gift, that tax benefit disappears,” Kaushik cautioned.
The return math changes
The strategy of buying discounted SGBs from the exchange and holding them for tax-free maturity gains now weakens.
Illustrating the impact, Kaushik noted, “If you bought an SGB from the exchange at ₹7,000 and it matures at ₹11,000, the ₹4,000 gain becomes taxable.” At a 12.5% long-term capital gains rate, that would mean a ₹500 tax per bond — returns that earlier would have remained fully with the investor.
“This change kills the strategy of buying discounted SGBs from the secondary market to earn tax-free maturity gains,” he wrote.
Pricing and liquidity impact
Kaushik also flagged market implications. “Prices will likely adjust to reflect the tax cost,” he said, warning that secondary market bonds could trade at a wider discount to gold prices.
“Liquidity is the silent casualty,” he added. If the tax benefit does not transfer, fewer investors may be willing to buy older SGB tranches, making exits harder without either accepting a lower price or paying tax.
The sovereign backing and 2.5% coupon remain intact. But as Kaushik summed up: “For everyone else, SGBs behave like a normal taxable asset. The era of easy ‘tax-free gold’ is ending.”
India’s “tax-free gold” trade is undergoing a structural reset. The secondary market for Sovereign Gold Bond Scheme (SGBs) is set to lose its biggest attraction: tax-free capital gains at maturity for non-original buyers.
In a post on X (formerly Twitter), CA Nitin Kaushik wrote: “The secondary market for SGBs is NO LONGER a tax haven.”
From April 2026, tax-free redemption will apply only to investors who subscribed to SGBs in the primary issue directly through the Reserve Bank of India (RBI) and hold them till maturity.
“If you didn’t buy the bond directly from RBI during the initial issue, the government will tax your price gains at maturity,” Kaushik said, adding that the change effectively creates “two types of investors.”
Two classes of investors
Under the revised framework:
Original subscribers
- 2.5% annual interest
- Tax-free capital gains at maturity
Secondary buyers (exchange purchases or transfers)
- 2.5% annual interest
- Long-term capital gains tax payable at maturity
“Once the bond changes hands through the stock exchange or even as a gift, that tax benefit disappears,” Kaushik cautioned.
The return math changes
The strategy of buying discounted SGBs from the exchange and holding them for tax-free maturity gains now weakens.
Illustrating the impact, Kaushik noted, “If you bought an SGB from the exchange at ₹7,000 and it matures at ₹11,000, the ₹4,000 gain becomes taxable.” At a 12.5% long-term capital gains rate, that would mean a ₹500 tax per bond — returns that earlier would have remained fully with the investor.
“This change kills the strategy of buying discounted SGBs from the secondary market to earn tax-free maturity gains,” he wrote.
Pricing and liquidity impact
Kaushik also flagged market implications. “Prices will likely adjust to reflect the tax cost,” he said, warning that secondary market bonds could trade at a wider discount to gold prices.
“Liquidity is the silent casualty,” he added. If the tax benefit does not transfer, fewer investors may be willing to buy older SGB tranches, making exits harder without either accepting a lower price or paying tax.
The sovereign backing and 2.5% coupon remain intact. But as Kaushik summed up: “For everyone else, SGBs behave like a normal taxable asset. The era of easy ‘tax-free gold’ is ending.”