Taxation on Sovereign Gold Bonds (SGBs) in India

One thing that is not clear is where does this interest go? If I buy sovereign gold bond will it come to my bank account? Or the zerodha account?

semi-annually means Sept and march or other months?


The definition of Long Term Capital Asset as per Section 2(29A) of the Income Tax Act is a capital asset which is not a short-term capital asset.

The definition of Short Term Capital Asset as per Section 2(42A) of the Income Tax Act mentions period of holding of 12 months in case of a security (other than a unit) listed in a recognized stock exchange in India.

The definition of Securities as per Section 2(14) of the Income Tax Act is the meaning as per Section 2(h) of the Securities Contracts (Regulation) Act, 1956

The definition of Securities as per Section 2(h) of SCRA Act includes government securities

Thus, SGB i.e. a government security is a short term capital asset if held for upto 12 months and a long term capital asset if held for more than 12 months.

Hope this helps :slight_smile:

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Thanks for summarizing this; @Pratist has also pointed this out in their reply above.

It will come to your bank account, provided the SGB is in your demat account before the date of interest payment.

If the SGB is “in transit” on the due date of interest payment, because you bought it close to the due date, I am not sure where the money will go. I assume that it would go to Zerodha in some manner, with instructions to pass it on to you. I have no experience with this; I am basing this assumption on how dividends are paid for shares which are “in transit” because they were bought close to the record date.

The dates are based on when each SGB was originally issued. So, not uniformly Sep and Mar. There is a thread on these forums where someone has very helpfully collected this information for most of the SGB which are currently in circulation. I don’t have the link with me; you should be able to find it if you search the forum.

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Nakul Kulkarni, Business Analyst at Zerodha, says that “buying SGBs in secondary market and holding till maturity or redemption from secondary market or RBI’s buy back route will attract a long-term capital gains tax of 20 percent (for holding period of more than 36 months).”


@Quicko isn’t this incorrect as per your article?
@nithin do you know this person?

That is our fellow forum member @Nakul

But I am also interested in knowing about this. From what I am able to find, there is little clarity about this currently. I have seen various articles which claim that capital gains will not be exempt for secondary market purchases (one such article led to question my initial assumptions that they were exempt in this forum thread). But on the other hand, on Twitter, people still believe that capital gains are exempt on secondary market purchases of SGBs -


The meaning of Long Term Capital Asset as per the Income Tax Act is reproduced below:

Any capital asset held by a person for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset.

However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India, units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months.

Hence, the SGB being in nature of government securities and if holding period is more than 12 months, then it shall be treated as long term capital asset.

Moreover, Any capital gains arising to an investor other than Individual on the redemption of SGBs (whether on maturity or pre-mature redemption) shall be taxable as a long-term capital gain. As SGBs are listed on stock exchanges in India, the investor has an option to compute the capital gain with or without taking the benefit of indexation. If the benefit of indexation is taken, then tax shall be charged at the rate of 20% otherwise at the rate of 10%.

However, classification of capital gain or holding period can be ambiguous and may differ from tax experts.

I hope, it helps! :slightly_smiling_face:

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@Quicko the question was not about the definition of long term, the question was about whether you need to pay tax if you buy SGB from secondary markets and then redeem them with RBI. As per Nakul in the above article, you need to pay tax. As per your site, tax is exempted. Can you confirm my understanding?


As per Income tax act, redemption of Sovereign Gold Bonds issued by the Reserve Bank of India by an assessee being an individual shall not be considered as transfer and hence, it is exempt for the purpose of capital gains tax.

Here, SGB can also be traded in secondary markets. If you buy SGBs from the secondary market and then redeem it on the maturity then it will be exempt from the capital gain tax. But, if you sell the bonds in secondary markets before the redemption period, then it will attract the capital gain tax.

However, opinion can be defer from tax experts as tax implications on withdrawal may be ambiguous.


Do you have to redeem manually, or will it automatically close upon maturity, with the proceeds transferred to your bank account? If so which bank account, i.e. when we buy through the secondary market - we may use 1 account for trading. Will it transfer to that?

I understand that the SGB price is determined by taking the 3 day average preceding the maturity date. Is that correct?

after 8 years, redemption should happen automatically. Proceeds will be transferred to bank account linked with your demat account where you are holding SGB
Early redemption (on 5th, 6th, 7th year), needs to be done manually.

Yes, 3 day average price as quoted by Indian Bullion Jewelry Association

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As per RBI Guidelines, both interest and redemption proceeds will be credited to the bank account furnished by the customer at the time of buying the bond on the maturity or redemption of SGBs. Early redemption before 8 years of maturity may be done manually.

For pricing, the nominal value of Gold Bonds shall be in Indian Rupees fixed on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.

I hope, it helps! :slightly_smiling_face:

For older SGB series (until Sovereign Gold Bonds 2017-18 – Series II), the simple average closing price for the previous week is considered for arriving at the redemption price (also refer GOI Notification F.No. 4(19)-W&M/2014 dated January 14, 2016) -

On maturity, the Gold Bonds shall be redeemed in Indian Rupees and the redemption price shall be based on simple average of closing price of gold of 999 purity of previous week (Monday to Friday) published by the India Bullion and Jewelers’ Association Limited.

Also, recent press releases (2020-2021/1302 and 2020-2021/1060) by RBI regarding early/premature redemption of older SGB series mention about this -

In terms of Government of India Notification F.No.4(19)-W&M/2014 dated March 04, 2016 and RBI circular IDMD.CDD.No.2020/14.04.050/2015-16 dated March 04, 2016, the redemption price of Sovereign Gold Bond (SGB) is based on the simple average closing gold price of 999 purity [published by the India Bullion and Jewellers Association Ltd (IBJA)] of the week (Monday-Friday) preceding the date of redemption.

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A good write up on SGB


I’m doing some research on Sovereign Gold Bonds – there is a tax question that no one seems to be clear about. Can’t seem to see any clarity on this from RBI either.

If you buy the SGBs on the stock exchange (e.g. via Zerodha) - will there be no capital gains LTCG tax if…

  1. held to maturity, and
  2. sold on the exchange itself.
  1. No capital gains
  2. Yes capital gains


You can refer below answer for SGB tax implications:

Further you can read below article for more insights about SGBs:

I hope, it helps!

on interest credit dates only.

If someone is under 2.5lakh bracket, then also he has to pay tax under LTCG ?

Hi @Stonecold, if the individual is an Indian resident then he isn’t liable to pay on LTCG if total income is less than 2.5 lakhs.