I had similar doubts. After reading other articles, I read all the acts myself and came to the above conclusion. It’s important to know how the government excluded SGBs from capital gains. What is the exact wording used? If you know how. Then the rest becomes clear. . To quote,
Basic definition tions:
Section 2:
(14) “capital asset” means—
(a) property of any kind held by an assessee, whether or not connected with his business or profession;42A) “short-term capital asset” means a capital asset held by an assessee for not more than 9[twenty-four] months immediately preceding the date of its transfer :
Provided that in the case of a security 10[***] listed in a recognized stock exchange in India or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or a unit of an equity oriented fund or a zero coupon bond, the provisions of this clause shall have effect as if for the words 11"[twenty-four] months", the words “twelve months” had been substituted:42B) “short-term capital gain” means capital gain arising from the transfer of a short-term capital asset ;
29AA) “long-term capital asset” means a capital asset which is not a short-term capital asset ;
(29B) “long-term capital gain” means capital gain arising from the transfer of a long-term capital asset ;
Note that the keyword is the definition of short term capital asset in Section 2 42 (A): transfer
Section 45 is the start of capital gains, which says how capital gains should be taxed.
- (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F , 54G and 54H, be chargeable to income-tax under the head “Capital gains”, and shall be deemed to be the income of the previous year in which the transfer took place.
Certain transactions are excluded from “transfer”. This is defined in Section 47.
- Nothing contained in section 45 shall apply to the following transfers :—
…
(viic) any transfer of Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015, by way of redemption, by an assessee being an individual;
This is how government excluded SGBs, by removing it from the definition of transfer in 47(viic). Since it says “redemption” and doesn’t explicitly exclude premature redemption, I believe all type of redemption is included.