Budget 2026: With gold prices rising, is bringing back Sovereign Gold Bonds feasible for the government?

Budget 2026 expectations:  With less than two weeks to go for the Union Budget, the finance ministry is weighing a wide range of tax and policy suggestions from market participants. One proposal gaining traction is the reintroduction of Sovereign Gold Bonds (SGBs), especially at a time when gold prices are trading near record highs. Many investors argue that reviving SGBs could once again provide a structured, transparent and tax-efficient way to invest in gold, particularly when volatility across asset classes remains elevated.

When SGBs were actively issued, they emerged as one of the most preferred gold investment avenues. Backed by the government, they removed concerns related to storage, purity and insurance associated with physical gold. Investors earned a fixed 2.5% annual interest on their investment, in addition to benefiting from any rise in gold prices. Crucially, capital gains on redemption at maturity were tax-free, giving SGBs a clear edge over physical gold and even some market-linked products for long-term investors.

At present, however, no new SGB tranche is available. The issuance of the scheme was suspended in early 2024 and remains discontinued as of late 2025 and early 2026. The last tranche, SGB 2023–24 Series IV, was issued in February 2024. While existing SGBs continue to accrue interest and will be redeemed as per their original terms, fresh investment opportunities under the scheme are currently absent, with investors advised to track RBI or PIB announcements for any policy changes.

Should the government reintroduce SGBs?

Industry experts remain divided on whether this is the right time to bring back the scheme. Aksha Kamboj, Vice President, India Bullion & Jewellers Association (IBJA) and Executive Chairperson, Aspect Global Ventures, believes SGBs still serve an important economic and investor function. “With gold prices hitting new records in a situation of heightened market volatility, it is timely to revisit instruments that encourage structured and transparent investment in the gold market,” she said.

Kamboj highlighted that SGBs played a significant role in the financialisation of gold by allowing investors to gain from price appreciation without holding physical gold, along with an additional interest income. “By strategically re-launching SGBs, it may be possible to cater to investor requirements at high price levels while also supporting objectives such as reducing physical gold imports,” she said. However, she added that any relaunch must ensure a clear and efficient exit mechanism for both investors and the government, given price volatility.

On the other hand, some market participants point out that investor preferences are already shifting. Saurabh Jain, Co-founder and CEO of Stable Money, said rising gold prices have led to a surge in investments through gold ETFs and systematic investment plans. “This week has seen the highest number of users transacting in gold on our platform,” he said, noting that silver ETFs are also gaining traction as part of diversified precious metals exposure.

Jain acknowledged that SGBs have delivered strong outcomes historically but said they have become fiscally challenging for the government to maintain at elevated gold prices. “From an investor standpoint, SEBI-regulated gold ETFs offer a reliable and efficient way to participate in gold,” he said, adding that such products provide ease, liquidity and regulatory oversight.

What has the government said about SGBs

The government has repeatedly flagged cost concerns around the scheme. During the monsoon session of Parliament in 2025, Minister of State for Finance Pankaj Chaudhary, in a written reply to the Rajya Sabha, said the SGB scheme, launched in 2015 to reduce demand for physical gold, had mobilised subscriptions equivalent to about 146.96 tonnes of gold, amounting to Rs 72,275 crore, across 67 tranches as of March 31, 2025. Of this, around 18.81 tonnes had already been redeemed by June 15, 2025.

The government clarified that resource mobilisation decisions are taken after assessing relative borrowing costs across instruments such as government securities, treasury bills and SGBs. It noted that global geopolitical unrest has pushed gold prices sharply higher, increasing the cost of borrowing through SGBs. As a result, the government said any decision on issuing new tranches would depend on market conditions, particularly gold price trends and their impact on borrowing costs.

The government had said in 2025 that elevated global uncertainty has driven up gold prices, making SGBs a more expensive funding option for the government. This remains a key factor influencing the pause on new issuances.

SGB: Taxation and maturity

SGBs come with a maturity period of eight years, with an option for premature redemption available from the fifth year onwards on interest payment dates. Investors are informed about the bond’s maturity one month in advance, and the redemption proceeds are credited directly to the registered bank account. To avoid delays, any changes in bank or contact details must be updated with the issuing bank.

SGBs are also tax-efficient, as capital gains on redemption at maturity are fully exempt from tax, and no tax deducted at source applies to interest income. Held in digital form, they eliminate storage, insurance and purity concerns. The bonds are tradable on exchanges after a lock-in period, can be used as collateral for loans, and help diversify portfolios, with online subscriptions often offering a price discount.

Gold prices

Gold and silver prices hit fresh record highs on Wednesday, driven by strong safe-haven demand amid a weaker US dollar and rising geopolitical tensions around the Greenland crisis. The rally was further supported by turmoil in the Japanese government bond market, prompting investors to shift toward precious metals.

In global markets, spot gold crossed the psychological $4,800 an ounce mark for the first time, while silver surged to a record $95.87 an ounce. Domestically, MCX gold opened higher at Rs 1,51,575 per 10 grams and climbed to a new all-time high of Rs 1,58,339 per 10 grams during the session.