Sovereign Gold Bond (SGB) holders have seen returns between 34% and 44% over the past year, even as gold prices recently cooled. With the government stopping new issuances, existing bonds continue to trade on exchanges. Investors should note that Budget 2026 changes now limit capital gains tax exemptions to original subscribers who hold their bonds until the full eight-year maturity.
Investors holding Sovereign Gold Bonds (SGBs) have seen impressive gains over the last twelve months, with returns ranging from 34% to 44%, according to recent exchange data. This performance holds strong despite a recent cooling in physical gold prices. Although the Indian government has paused new issuances of these bonds, roughly 45 different tranches remain actively traded on the NSE and BSE. These bonds continue to provide investors with a fixed annual interest payment of 2.50% and are redeemed at the prevailing market price of gold upon maturity.
Impact of Budget 2026 on Secondary Market Buyers
A critical change introduced in the Budget 2026 has altered the tax landscape for SGB investors. Previously, the tax-free maturity benefit was broadly applied. Now, the government has restricted this exemption to initial subscribers who purchased the bonds directly from the Reserve Bank of India and hold them until the full eight-year maturity date. For those purchasing SGBs from the secondary market, redemption will now attract capital gains tax. This change is designed to manage the government’s rising debt obligations and shift the focus away from SGBs as a speculative trading instrument.
Understanding Government Debt Obligations
The government's total outstanding liability linked to SGBs is significant, estimated between ₹1.12 lakh crore and ₹1.20 lakh crore. This is a massive increase from when the scheme was first launched in late 2015. At that time, gold prices were near ₹25,000 per 10 grams, whereas current prices have surged to approximately ₹1.29 lakh per 10 grams. As gold prices have risen, so has the government’s cost to redeem these bonds at maturity.
Market Performance of Existing Bonds
Recent trading reflects the resilience of these instruments. For instance, the bond maturing in February 2032 recently closed at ₹14,537 per gram, representing a 34% increase over the previous year. Another series maturing in August 2028 closed at ₹14,093. While these bonds offer a way to gain exposure to gold price movements alongside a fixed interest income, they are not immune to market volatility.
Investors currently holding or considering purchasing SGBs on the secondary market should carefully review the new tax rules, as the lack of capital gains exemption can significantly impact the net return upon maturity compared to initial subscribers. The key monitorable moving forward will be how the remaining outstanding debt is managed as these bonds approach their respective maturity dates over the coming years.